The Pacific Alliance Blog spoke recently to Juan Felipe Toro-Fernandez, our new contributor to the Blog. We interviewed him about his research regarding the extent to which the Framework Agreement in the Pacific Alliance and the Comprehensive and Progressive Agreement for Transpacific Partnership (CPTPP) could become the pathway to developing “The Latin American Services Factory for the Asia Pacific”.Photocredits: Juan Felipe Toro-Fernandez

Mr Toro-Fernandez is a founding partner and the current legal manager of Kesher Business & Investments, a firm specialising in supporting companies in their internationalisation and expansion strategies in Latin America with a focus on the Colombian market. He is also a lecturer at the Law School in Universidad EAFIT and for other universities in Colombia. Mr Toro-Fernandez holds a Master in International Law, Investments, Trade and Arbitration from Universität Heidelberg and Universidad de Chile.

Mr Toro-Fernandez, how did you become interested in the topic of international investments in the Pacific Alliance?

I chose the topic of international investments in the Pacific Alliance because between 2017 and 2018, I carried out a research project that was part of my master’s degree. I titled the thesis “Normative Convergence Between the Pacific Alliance and the Comprehensive and Progressive Agreement for Transpacific Partnership as a Way of Attracting Investments and Promoting Services Chaining with Asia-Pacific: Analysis and Normative Comparison of both Investment Chapters“.

My goal was to compare and survey the investment chapter in the Additional Protocol to the Framework Agreement of the Pacific Alliance (PA) with the investment chapter in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). I wanted to examine convergence opportunities between both regimes to attract investments and promote services linkages (mode 3, commercial presence) with the Asia Pacific region.

I studied both legal regimes accounting for the origins and background of the investment subject and their legal structure. I endeavoured to compare their legal frameworks and address the question of the extent to which these agreements incorporated new generation investment protections for the investors (and the states). I also questioned whether these legal provisions contribute to attract investments and foster productive linkages in the services sectors between the PA and the Asia Pacific region.

I concluded that both investment chapters corresponded, were similar and therefore converged in terms of international investment standards (new generation clauses) such as non-discrimination standards (National Treatment and Most Favoured Nation), absolute standards of protection for the investors (eg, the Minimum Standard of Treatment, Fair and Equitable Treatment, Full Protection and Security), investment protection standards (eg Expropriation, Compensation and the free transfer guarantee), and Investor-State dispute resolution.

I also concluded that the degree of legal harmonisation and convergence achieved through both agreements allows for attracting foreign investments in Latin America and promoting services linkages with the Asia Pacific region.

What does the notion of a Latin American Services Factory for the Asia Pacific entail?

The third chapter of the thesis aims to examine the extent to which both legal regimes — the PA and the CPTPP — allowed for the promotion of services linkages connected with mode 3 of services supply (commercial presence). This idea was presented under a collaboration scheme that I named “the Latin American Services Factory for the Asia-Pacific.”

I understand “the Latin American Services Factory for the Asia-Pacific” as a business conglomerate, business structures linked to one another in an organised manner through horizontal collaboration schemes/networks. These schemes interconnect to provide services to large companies from the Asia Pacific region.

I also envisioned the schemes as an organised gear of small, medium and large enterprises based on all the PA members. These enterprises will supply services to multinational companies throughout all the stages of the supply chain. These enterprises interconnected around the Factory could also receive capital investments from the multinational companies located in the Asia- Pacific countries under vertical schemes.

Finally, I put forward the idea that the “Latin American Services Factory” for the Asia-Pacific would develop as a regional linkage within the PA under a specialisation model where concrete tasks would be allocated throughout the several stages. The Services Factory should promote services supply not only amongst the PA members but also with countries in the Pacific Rim, emphasising the CPTPP members.

Are the Pacific Alliance countries ready to lead a process to structure and develop such Latin American services factory?

I believe that this is the case. By having such a broad regulatory framework, the PA is prepared to lead and advance these productive linkage types between the members. I also maintain that a broad regulatory framework for the PA allows its members attracting investments from companies located in the Asia Pacific region.

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Brief:
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. The publication encompasses ten chapters and the introduction by the editors.

Resumen:
No disponible

Editors: Isabel Rodríguez Aranda and Edgar Vieira Posada
Spanish Title: Perspectivas y Oportunidades de la Alianza del Pacífico
Full document: Not available (Editorial CESA, 2015)

Abstract:
Not available

Resumen:
En una coyuntura tan turbulenta como la actual, profundizar la integración regional no es una opción sino un imperativo. Junto con África, América Latina y el Caribe presenta los menores índices de comercio intrarregional del mundo. Apenas el 16% del valor de sus exportaciones se dirige a la propia región, muy por debajo del 50% que registran Asia oriental y América del Norte, y del 64% de la Unión Europea. Asimismo, los encadenamientos productivos entre países de la región son, en general, escasos y débiles.

Un gran obstáculo al comercio y la integración productiva intrarregionales es la fragmentación del espacio económico regional. Hoy coexisten varios mecanismos de integración económica, cada uno de los cuales ha generado sus propias reglas en temas que van desde las normas sanitarias y de protección al consumidor hasta las compras públicas y el tratamiento de la inversión extranjera. Estas discrepancias regulatorias imponen altos costos a las empresas (especialmente a las pequeñas y medianas empresas (pymes)) que desean exportar al mercado regional o invertir en él, y dificultan el desarrollo de cadenas regionales de valor. De este modo, el gran potencial que ofrece el mercado regional, con sus más de 640 millones de habitantes, sigue sin aprovecharse plenamente.
[…]

En este contexto, resulta crucial tender puentes entre los principales mecanismos de integración económica de la región. Por ello, la Comisión Económica para América Latina y el Caribe (CEPAL) ha apoyado con entusiasmo la propuesta de “convergencia en la diversidad” entre la Alianza del Pacífico y el MERCOSUR, formulada por el Gobierno de Chile en 2014.

Institutional Author: Economic Commission for Latin America and the Caribbean
Spanish Title: La convergencia entre la Alianza del Pacífico y el MERCOSUR: enfrentando juntos un escenario mundial desafiante
Full document: 2018, ECLAC, La convergencia entre la Alianza del Pacífico y el MERCOSUR

Abstract:

This book delves into the Pacific Alliance from different perspectives, including the realms of foreign diplomacy, economy, politics and technological aspects, whilst analysing the opportunities that may occur during this process of regional integration. […]

In short, this book aims to present a deep and meticulous analysis of what the Pacific Alliance is so far. Beyond delving into an informed explanation of the process of regional integration, the book tries not only to offer a landscape of untapped opportunities that may potentially contribute to the success of the Pacific Alliance but also to make serious recommendations in areas that may present substantial challenges for the Pacific Alliance.

Edited book with 15 contributions from several authors

Resumen:
No disponible

Editors: Mario Torres Jarrín and Jonathan Violante Pica
Full document: 2016, Torres & Violante, Emerging Markets-The Pacific Alliance

Abstract:
Not available

Resumen:
El presente trabajo se basa en el estudio y análisis de las relaciones exteriores –específicamente comerciales– entre Corea del Sur y los países de la Alianza del Pacífico. Es por ello que se plantean cuestiones sobre la relación de la República de Corea con los países de la Alianza del Pacífico, y se hace foco en su vínculo político y comercial con México. Este último ha tenido una relación cercana con Corea del Sur, principalmente a partir de los años noventa al ser signatario del TLCAN; y con más énfasis en la última década, al ser miembros ambos países de organizaciones y grupos internacionales y regionales tales como la Alianza del Pacífico. El ya mencionado país asiático tiene intereses comerciales muy notorios en México, generados por la ubicación geográfica de nuestro país y sus recursos naturales.

De igual forma México centra algunos intereses sobre esa nación del Este de Asia, pero prestando atención casi únicamente a lo referente a inversión extranjera directa, y sin llegar a la intención máxima de firmar un Tratado de Libre Comercio con Corea (este último país sí está dispuesto a hacerlo desde hace casi una década). En este artículo se aborda la función de los bloques regionales y el rol de Corea como potencia media en aras de reforzar las relaciones con cada uno de los miembros de Alianza del Pacífico, dando un enfoque característico a la relación bilateral Corea del Sur-México y posibles explicaciones del retraso en la firma de un TLC entre ambos.

Authors: Renato Balderrama Santander and Ana Karen Velázquez
Spanish Title: La política exterior y comercial de Corea del Sur en el marco de la Alianza del Pacífico: una visión desde México
Full document: 2016, Balderrama & Velásquez, La Política Exterior y Comercial de Corea del Sur en el Marco de la Alianza del Pacífico- una Visión Desde México

Abstract:
The Additional Protocol to the Framework Agreement of the Pacific Alliance (PA Additional Protocol) sets forth an additional layer for the protection of foreign investment to the preexisting International Investment Agreements (IIAs) between the PA Member States, posing a number of systemic questions regarding the application and interpretation of different treaty provisions and the way how they interplay. Against this background, the chief purpose of this article is to ascertain the extent to which the PA Member States have preserved a regulatory space for the protection of their essential interests in the PA Additional Protocol and the pre-existing IIAs between them.

Particular emphasis is given to variations in the scope of national security and public order exceptions vis-à-vis other investment treaty provisions, taking into account potential situations of overlapping and conflict of norms between the PA Additional Protocol and the pre-existing IIAs in place.

The article concludes that the narrower scope of the national security and public order exceptions in the PA Additional Protocol is outweighed by other provisions in the treaty that carefully balance the protection of investments vis-à-vis the right to regulate in the public interest. As highlighted by the UNCTAD, the PA Additional Protocol has all the elements suggested to preserve a regulatory space for public policies of host countries and to minimize the exposure to investment arbitration in this ground; this encompasses sensitives issues that would be otherwise governed by national security and public order exceptions in pre-existing IIAs between the PA Member States.

Author: Roberto Claros
Full document:2016, Claros, Investment Protection –Drawing Lessons from the PA Investment Treaties

Abstract:
The entry into force of the Additional Protocol of the Framework Agreement of the Pacific Alliance in May 2016 marked an important step towards the regional integration efforts of its four members: Chile, Colombia, Mexico and Peru. In addition to promoting trade and investment linkages among its members, a core objective of the Pacific Alliance —and what distinguishes it from other regional integration efforts in Latin America— is to serve as a platform for economic and commercial integration between Latin America and the Asia-Pacific. It is, therefore, of particular interest to evaluate current economic developments taking part in modern Latin America and their impact upon these integration efforts.

The data of bilateral flows of trade in goods at the product and sector level, together with the study of trade in services as well as foreign direct investment, reflect the strong links within the Pacific Alliance. It also reveals the potential to further increase its members’ participation in regional and global value chains.

The Additional Protocol will serve not only to eliminate tariffs for nearly 95% of intraregional imports but also to foster economic integration through cumulation of origin and trade facilitation.
The Pacific Alliance faces several challenges in the medium-term. First, it must successfully incorporate Costa Rica as a full member, the first accession since the Pacific Alliance was established.
Further, it must define how to fulfil one of its driving forces: to serve as a bridge between Asian and Latin American countries on both sides of the Pacific.

Authors: José Durán Lima and Daniel Cracau
Institutional author: Economic Commission for Latin America and the Caribbean (ECLAC)
Full document: 2016, Duran & Cracau, The Pacific Alliance and its economic impact on regional trade and investment

Abstract:
The establishment of a Free Trade Area of the Asia-Pacific (FTAAP) is one of the priorities of the Asia-Pacific Economic Cooperation (APEC) to enhance regional economic integration beyond the Bogor Goals, as reflected in the Beijing Roadmap for APEC in 2014. Multiple pathways could converge into the FTAAP, and these include the Trans-Pacific Partnership (TPP) and the Regional Comprehensive Economic Partnership (RCEP). This paper discusses the potential of the Pacific Alliance (PA) to provide an additional pathway that also contributes to the FTAAP process and regional integration in Asia-Pacific.

The analysis suggests that the PA can be considered a comprehensive mechanism that is in line with the Bogor Goals, and its achievements in areas such as market access, services, investment, and new generation issues suggest that it is a WTO+ agreement. However, some issues would need to be negotiated among its members—such as intellectual property, labour, and environmental protection—for the PA to profile itself as a pathway equivalent to the TPP. The PA, however, is more comprehensive than the RCEP. The analysis also suggests that despite having only four members, the PA is a “living agreement” and is open to other APEC economies for membership and, therefore, has the potential to become a region-wide agreement.

Resumen:
No disponible

Authors: Camilo Pérez-Restrepo and Adriana Roldan-Pérez
Full document: 2016, Restrepo & Roldan, Is the Pacific Alliance a Potential Pathway to the FTAAP?