Following the collapse of Doha, Latin America and Asia should seize the promise of pan-Pacific trade.
BY OSVALDO ROSALES
AND ERIC FARNSWORTH
Despite seven years of talks, the latest efforts to secure the Doha Round of World Trade Organization (WTO) negotiations have now failed. While this is a disappointment for those who believe that economic development is fueled in part by trade and investment, interested nations are finding new paths forward. Increasingly, nations are looking to regional, plurilateral, and bilateral agreements as a complement to the WTO framework.
While not a perfect solution, these steps are proving to be more practical to implement than a complex and politically sensitive global agreement. Asian nations have taken the lead. Countries in the Americas would be well served by looking outside the hemisphere to enhance pan-Pacific trade and investment links.
In recent years, Asian nations have established a strategic relationship with Latin America based on the need for raw materials to feed supercharged economic growth. Latin American suppliers have benefited handsomely. If strong growth in China, India, and other Asian economies is sustained, Latin America will continue to gain, particularly if part of China’s massive foreign exchange reserves is invested in Latin America.
With this in mind and with its own economic integration project—the Free Trade Area of the Americas—on indefinite hold, the nations of the Western Hemisphere could look toward Asia for inspiration in its integration efforts. Nearly 60 percent of all Asian trade is intra-regional, up from less than 40 percent two decades ago, and over 100 free-trade agreements (FTAs) are currently in effect or under negotiation within the Asia-Pacific region. To advance their own economic development based on the emerging patterns of Asian-Latin American trade and investment, nations of the Western Hemisphere cannot afford to be excluded from further Asian integration efforts and should actively pursue inclusive liberalization in the Asia-Pacific region—the engine of recent world economic growth. With Chile, Mexico, Peru, Canada, and the United States among its 21-member economies, the Asia Pacific Economic Cooperation (APEC), whose leaders next meet in Lima, Peru, in November, provides a promising forum for such a dialogue.
The 21-member economies of APEC have already agreed to study prospects for a Free Trade Area of the Asia Pacific (FTAAP) as a long-term goal. A promising first step toward this goal was the establishment in 2005 of the Trans-Pacific Strategic Economic Partnership (P4) including Singapore, Chile, New Zealand, and Brunei, which the United States has just announced its desire to join. U.S. participation could open the door to broader Asia-Pacific regional economic integration with like-minded countries committed to high-standard trade and investment agreements. This should also be pursued in order to lessen the potential negative effects, such as trade diversion or selective protectionism, of these subregional agreements.
Additional agreements are under discussion. The United States recently announced negotiations for investment treaties with China and Vietnam. In South America, Chile has FTAs with China, Japan, Korea, and Australia, a partial agreement with India, and ongoing or anticipated negotiations with Malaysia, Thailand and Vietnam. Peru is in negotiations with China, in addition to the already-signed FTA with Singapore and the “Early Harvest” agreement with Thailand. In fact, some 15 trade agreements will link five Latin American countries with 11 Asian economies by 2010, in addition to the 10 hemispheric nations that have already implemented agreements with the United States (with two more, Colombia and Panama, anticipated). A group of Latin American nations calling themselves the Arc of the Pacific has also banded together to develop a joint strategy for approaching Asia.
What’s needed now is a dialogue to achieve convergence among these agreements and to determine the rationale, and plan, for further hemispheric integration with Asia.
Complications abound, of course. Efforts to harmonize existing and prospective trade agreements will quickly be frustrated unless negotiation partners keep the bigger picture in mind and refuse to be drawn into the “not invented here” syndrome. Trade rules including rules of origin will need to be addressed, and flexibility will be required. At the same time, promising efforts such as the P4 could be expanded to include Colombia, Mexico, Peru, Thailand, and others. Within APEC itself, the three Latin American members should play a protagonist role in coordinating positions not only in APEC-related forums but also in and between the intra-regional integration efforts, with concrete proposals in infrastructure, energy, logistics, and connectivity.
For its part, the United States would also benefit from enhanced pan-Pacific trade and investment engagement, though it may well react with indifference instead. If it does, it will continue losing opportunities, including, for example, market share in Latin American trade to Asian economies. The costs of a time-out on trade expansion would be great, particularly at a time when exports are one of the few bright spots of the U.S. economy. And while the United States potentially stands still, countries around the world continue to negotiate with each other to break down barriers to trade and investment, increasingly putting U.S. products at a competitive disadvantage.
Nonetheless, to the extent a more active U.S. posture were achievable during this electoral period, a useful place to concentrate would be in pushing hard for the harmonization of rules of origin contained in its agreements with Latin America and Canada. It would then pursue similar actions in trans-Pacific relations including APEC. If such actions proved to be overly ambitious, high-level meetings focused on trade facilitation and aid for trade, advancing infrastructure and logistics, and fostering capacity building efforts in Latin American nations would help pave the way for more ambitious initiatives in the future.
The collapse of Doha—whether or not it is a temporary collapse—need not be the final word. With APEC coming to Peru in November, the time is now to seize the promise of pan-Pacific trade.
Osvaldo Rosales is the Director of International Trade for the United Nations Economic Commission for Latin America and the Caribbean and a former Vice Minister of Trade of Chile. Eric Farnsworth is Vice President of the Council of the Americas in Washington. This column is based on the Viewpoint Americas series from the Council of the Americas. Republished with permission.