1. No category

Is the Pacific Alliance a potential pathway to the FTAAP?
Camilo Pérez-Restrepo1 & Adriana Roldan-Pérez2
Asia-Pacific Studies Centre- Universidad EAFIT (Colombia)
Priority: Enhancing the Regional Economic Integration: Pathways to FTAAP
Abstract:
The establishment of a Free Trade Area of the Asia-Pacific (FTAAP) is one of the APEC
priorities to enhance regional economic integration beyond the Bogor Goals. This was
reflected in the Beijing Roadmap for APEC in 2014. There are multiple pathways that could
converge into the FTAPP. This includes the Trans-Pacific Partnership (TPP) and the
Regional Comprehensive Economic Partnership (RCEP). This paper discusses the potential
of the Pacific Alliance (PA) as an additional pathway also contributing to the FTAAP. The
paper is composed of four main sections: the first one provides an update on the recent
evolution of the Pacific Alliance. The second section characterizes PA’s trade relations with
APEC economies and other economies in Asia. The third section makes a parallel between
the PA on other FTAAP pathways including TPP and RCEP in terms of the main areas of
negotiation. The last section discusses the opportunities the PA offers as a potential
pathway to the negotiation of the FTAAP.
1
Camilo Perez-Restrepo: Assistant Professor at the Asia-Pacific Studies Centre, Universidad EAFIT. Prof.
Perez-Restrepo is Master on Public Policy from Lee Kuan Yew School of Public Policy, at the National University
of Singapore (NUS). He has experience as advisor to the Pacific Economic Cooperation Council and the
Colombian government.
2
Adriana Roldan-Perez: Associate Professor at the Asia-Pacific Studies Centre, Universidad EAFIT. Prof.
Roldan-Perez holds a Master on International Relations from Wadesa University in Japan and is currently
doctoral candidate in the same institution. She has experience as consultant for the private sector in Colombia
and the Ministry of Foreign Affairs.
1
Introduction
Due to the enormous potential of the eventual consolidation of the FTAAP bringing together
the most important Asia-Pacific economies, compared with results that would be achieved
via the Transpacific Partnership Agreement (TPP)3 or Regional Comprehensive Economic
Partnership (RCEP)4, regional economies have begun to discuss possible strategies to
facilitate the eventual convergence of the agreements. The discussion has begun to evolve
moving from the traditional view where the pathways were seen as competitors (TPP vs.
RCEP), toward seeking the convergence of their interests. Working towards the
convergence of these arrangements is among the most important challenges facing the
APEC and one that would have significant importance for its future.
The negotiation of a Free Trade Area of Asia-Pacific (FTAAP), was first discussed during
the twelfth APEC Leaders Summit in Santiago de Chile in November 2004. This initiative
surged in response to FTAs proliferation in the region, and as a mecahnism to boost APEC’s
economic cooperation, investment and trade liberalization agenda beyond the Bogor Goals.
APEC members recognized the increasing complexity of the network of trade agreements
in Asia, and the costs associated with such complexity. APEC members welcomed FTAAp
intiiative in 2006 during the Leaders´s Summit held in Hanoi. However, it was not until 2010
that during the Leaders Summit in Yokohama, when specific actions towards the creation of
the FTAAP were announced. The FTAAP was conceived as a comprehensive free trade
agreement developed and built on the basis of existing trade liberalization initiatives.
The FTAAP has reminded a key priority for APEC economies ever since. Some of the most
recent actions towards the harmonization of TPP and RCEP provisions include the Beijing
Roadmap for APEC contribution to the realization of the FTAAP launched in 2014 in China,
established specific actions to promote the negotiation of this agreement, such as the
creation of a collective strategic study on issues related to the realization of the FTAAP.
These initiatives, remind at the centre of APEC priorities for 2015. According to authors like
C.Fred Bergsten, Noland, and Schott (2011) among other advocates the FTAAP idea, this
agreement would be the largest trade liberalization exercise in history. Trade figures in the
region reflect FTAAP’s enormous commercial potential. The intra-APEC trade is a third of
world trade. For most of the regional economies, trade with other APEC economies
represents over 65% their exports and imports. Such amount is comparable to the most
advanced integration processes, including the European Union.
The establishment of the FTAAP would further increase economic interdependence among
its members. The benefits would extend beyond APEC to influence multilateral negotiations
in the WTO. Furthermore, the FTAAP would reduce the problems arising from the
3
TPP negotiations include Australia, Brunei Darussalam, Canada, Chile, United States, Japan, Malaysia,
Mexico, New Zealand, Peru, Singapore, United States and Vietnam.
4
RCEP negotiations include ASEAN 10 members (Singapore, Thailand, Indonesia, Malaysia, Philippines, Brunei
Darussalam, Vietnam, Cambodia, Laos y Myanmar), together with China, Japan, Korea, India, Australia y New
Zealand.
2
proliferation of bilateral agreements, in particular, differences in the rules of origin. This is
particularly important, considering that given the current TPP and RCEP negotiation, add
further complexity to an already existing "noodle bowl" of bilateral agreements that
characterises economic integration in the Asia-Pacific region (Baldwin, 2006).
The TPP and RCEP offer a positive sum that promise substantial benefits to all participants
in the medium and long-term. Both could eventually converge on a Free Trade Area of the
Asia Pacific (FTAAP), as promoted by APEC. However, if no such convergence occurs, the
FTAAP project would be incomplete, since the two major world economies, the United States
and China, would not be linked by any agreement. In the short-term, a transpacific
agreement covering all economies in this region does not appear feasible in the
macroeconomic and political contexts. It is unlikely that in the short-term China offer
significant concessions in areas related to state-owned enterprises, services, intellectual
property, and environment and labor sectors of great importance to the United States.
Therefore, competition between the two models continue until more favorable conditions for
an eventual convergence between them are developed (Kuriyama, 2012).
The different pathways leading to the FTAAP are interdependent. Each influences the other
by demonstrating progress and attracting new members. Since the potential gains from
trade are especially significant for the economies involved, the ideal template would be one
that provides improved market access for the manufacturing sector in the emerging
economies while also offer substantial benefits on services, investment and high-tech
industries to advanced economies in the region. The economic argument for a more
comprehensive template is that it represents not only the interests of the United States, but
broadens the scope of liberalization and the potential gains for all participants. As a result
of this, many economies such as Singapore, Malaysia, Brunei Darussalam, Vietnam,
Australia and New Zealand are involved in the negotiation of both TPP and RCEP.
Chart 1. APEC and the Pacific Alliance
3
In addition to the TPP and RCEP as alternative pathways leading to the FTAAP, there is a
group of APEC economies (Chile, Mexico, and Peru), that along with Colombia, another
Latin American Pacific nation, have launched a parallel regional economic integration
process via the liberalization of trade, services, investment and a freer movement of people.
This group is the Pacific Alliance (PA), one of the most dynamic economic liberalization
processes, with over 30 observers, including several APEC economies. This agreement has
the potential to evolve to include these economies as members, and as such, become an
alternative pathway to achieve the FTAAP.
The paper is composed of four main sections: the first one provides an update on the recent
evolution of the Pacific Alliance. The second section characterizes PA’s trade & investment
relations with APEC economies. The third section makes a parallel between the Pacific
Alliance on other FTAAP tracks including TPP and RCEP in terms of the main areas of
negotiation. The last section discusses the opportunities the PA offers as a potential
pathway to the negotiation of the FTAAP.
1. Creation and evolution of the Pacific Alliance
As one of the most ambitious integration processes in Latin America, the Pacific Alliance
(PA) seeks the gradual construction of a deep integration area between Chile, Colombia,
Mexico and Peru, leading to a free movement of goods, services, and capital and a freer
movement of people. This group is one of the most promissory mechanisms for regional
economic integration because of its scope, objectives and the common foreign and
economic policy orientation of its members. The group is emerging as the first Latin
American regional integration initiative that includes among its founding objectives, the
projection its members to the Asia-Pacific region. The PA has a combined population of 216
million inhabitants with a GDP of US$ 2.1 trillion, equivalent to 35% of regional GDP, and
an average per capita GDP of US$ 10,131. The four countries represent 50% of total trade
in goods in the region, with exports exceeding $ 558,000 million and imports by $ 563,000
million in 2013. In the same year, these four countries received FDI accounting for almost
US$ 86,000 million, and were the destination of more than 32 million tourists.
The Pacific Alliance (PA) was created when Chile, Colombia, Mexico and Peru signed the
Declaration of Lima on April 28, 2011. After a series of high-level meetings to further discuss
the agreement, PA’s institutional foundations and objectives were laid down in the
Framework Agreement signed in Antofagasta, Chile on June 6, 2012. The process was
further advanced with the negotiation of an Additional Protocol to the Framework Agreement
signed on February 10, 2014 in Cartagena, Colombia. This agreement builds upon
previously existing (mainly bilateral) trade agreements between PA members, going beyond
the basic tariff reduction. The agreement is comprised of 19 chapters on issues at the core
of regional integration, such as market access, trade in services, rules of origin, technical
4
barriers to trade (TBT), sanitary and phytosanitary (SPS) requirements, trade facilitation &
customs cooperation, government procurement, e-commerce, investment and dispute
settlement, among other areas of cooperation among member countries (Direcon, 2014).
Despite is recent creation, PA has already set a record of important achievements Some of
the key achievements include: the stock& exchange market integration among its members
through the initiative known as the Integrated Latin American Market (MILA for its acronym
in Spanish); the establishment of a visa waiver program among its members; the creation of
a student and academic mobility platform and the Pacific Alliance Business Council (CEAP
for its acronym in Spanish). Member countries have also set a series of cooperation
mechanisms on tourism, trade & investment promotion, and even an agreement to share
embassies and diplomatic missions around the world.
Moreover, after holding nine presidential summits since its inception, and the changes in the
governments of Chile, Mexico and Peru, the Pacific Alliance remains at the core of regional
integration, thus demonstrating the high-level political commitment among its members.
The PA has drawn the attention of the international community. The group currently has 32
observer countries belonging to all regions of the world, including eight APEC members
(United States, Canada, China, Japan, Singapore, Korea, Australia and New Zealand). Two
of the current observers (Costa Rica and Panama) aspire to become members of the group
in the short-term. Furthermore, the open and inclusive nature of the Alliance has also
allowed it to promote an approach to other Latin American integration mechanisms such as
Mercosur. Achieving greater trade and economic integration with Mercosur has a strategic
importance for the PA, both for the promotion of productive linkages between the two groups
as to increase PA’s attractiveness as an international actor.
2. Assessment of the Pacific Alliances achievements towards regional
integration
A central element of the assessment of regional trade agreements (RTAs) such as the
Pacific Alliance (PA), the Trans Pacific Partnership Agreement (TPP) and the Regional
Comprehensive Economic Partnership (RCEP) is the comparison of the provisions
contained in the agreement vis-à-vis World Trade Organization (WTO) agreements. The
agreements are considered deep to the extent that its provisions constitute a significant
improvement in comparison to the conditions that parties would otherwise have as members
of the WTO (Wignaraja et al 2012; Dür et al 2014). For there to be substantial economic
benefits from the negotiation of RTAs among a group of countries, the agreement should
have comprehensive provisions on market access, services, investment and new generation
issues such as public procurement, regulatory coherence and trade facilitation, among
others. The following section assesses PA’s achievements in some of these areas:
5
Table 1: Main provisions of the Pacific Alliance
Market Access5
The PA is a comprehensive agreement in terms of market
access. Members agreed immediate liberalization on 92% of the
tariff lines upon entry into force. This comprises the tariff lines
that were previously liberalized via FTAs among PA members.
The remaining 8% will have tariff reduction periods between
three and 17 years. A limited amount of tariff lines (less than 1%)
was excluded from the negotiation. Tariff reduction measured by
the volume of trade (exports plus imports) reveals that about 99
% of the trade among PA members will be liberalized once the
tariff reduction schedule is completed.
6
Services
The PA is a comprehensive agreement in terms of services
liberalization. The agreement enhances service liberalization visà-vis the previous FTAs commitments among members. PA’s
agreements cover the five key sectors, including
telecommunications and the financial services that were
restricted in most of the previous regional FTAs. The new
agreement also addresses issues that were absent from bilateral
FTAs such as e-commerce and maritime transportation services.
7
Investment
Investment promotion and protection among PA members
contemplates the elements of MFN, and pre & postestablishment national treatment for investors across all sectors
(including telecommunications and banking, as previously
mentioned). Furthermore, PA created a Joint Committee on
Services and Investment that will serve as a platform to solve
disputes and improve the regional investment environment.
8
Public Procurement
The PA established a common regulatory framework for public
procurement. Before signing the protocol, not all member
5
The General Agreement on Trade and Tariffs (GATT) from 1994 is the baseline for market access liberalization.
Based on this agreement, an RTA that eliminates tariffs on 85% of tariff lines is considered covering substantially
all trade. Additionally, paragraph 5 (c) of Article XXIV, states a "reasonable time" as one that does not exceed
ten years. Therefore, RTAs that eliminates 85% of tariff lines in ten years, are classified as a relatively deep and
fast approach to tariff liberalization.
6
The General Agreement of Trade in Services (GATS) is the reference point on services liberalization. A regional
agreement is deem comprehensive as long as it covers five key sectors (business and professional,
communications, financial, transport, and labor mobility and entry of business persons).
7
Most comprehensive RTAs have investment liberalization provisions that go beyond the Most Favored Nation
(MFN) status and grant national treatment both at the pre-establishment and post-establishment stages, as well
has including explicit prohibitions to performance requirements. Comprehensive agreements also include
regulatory requirements such as dispute resolution mechanisms, the free transfer of investment dividends,
among other benefits for investors.
8
The WTO Government Procurement Agreement (GPA) serves as the baseline for public procurement
liberalization. GPA’s minimum commitments, include the principle of non-discrimination (domestic treatment)
and transparency. A RTA is comprehensive if in addition to this two principles, includes GPA+ provisions such
as public e-procurement, special incentives to SMEs, and cooperation.
6
countries had public procurement provisions in their bilateral
agreements. The new agreement updates the previous bilateral
provisions on transparency, national treatment, nondiscrimination, dispute settlement and public e-procurement.
The agreement also includes rules and actions to promote SMEs
participation on public procurement. In addition to this, it
eliminates existing reservations, hence expanding the number of
public entities that are allowed to open procurement bids to
foreign firms from other PA members.
Trade Facilitation and The PA offers substantive achievements on trade facilitation and
Customs
customs cooperation. Commitments include 1) Information
9
Cooperation
exchange between customs authorities; 2) expedite clearance of
goods, using international standards and automating
information; 3) simplify customs procedures; 4) include mutual
recognition of Authorized Economic Operators; and 5) facilitate
Single Windows interoperability.
Rules of Origin
The PA member negotiated harmonized rules of origin system.
The most important improvement compared to previous
agreements is the establishment of a “cumulative rules of origin”
which allows PA members to share production and jointly comply
with the relevant rules of origin provisions. The agreement also
contemplates flexible requirements when inputs are not
produced within the PA area. The “cumulative rules of origin”
allow supplier networks diversification, boost production
linkages, and regional value chains among its members.
Technical barriers to
The main achievement was the creation of a Committee on
trade (TBT)
Technical Barriers to Trade, which will monitor the exercise of
transparency and regulatory cooperation among members. The
agreement also established a Committee on Sanitary and
Phytosanitary Measures (SPS) to address the potential trade
problems that arise in the food trade among members. These
two chapters contain provisions that go beyond the commitments
made in the bilateral FTAs and the WTO. The members
established special committees to promote regulatory
cooperation in the cosmetics and pharmaceutical sectors.
Regulatory Coherence The PA is aiming to be at the forefront of regulatory coherence.
The High Level Group (HLG) established a technical group to
negotiate this chapter. The group had two negotiation rounds in
2013 and 2014, but the final agreement is yet to be signed.
Source: Alianza del Pacífico (2014a); Direcon (2014) and SICE-OAS (2014)
9
The WTO defines trade facilitation as "the simplification and harmonization of trade procedures, including
activities, practices and formalities required in the collection, presentation, communication and data processing
required for the movement of goods" (WTO, 2011). The basic principles are: transparency, simplification,
harmonization, cooperation and modernization. RTA is comprehensive if it covers this five basic principles.
7
3. Pacific Alliance’s trade relations with APEC economies.
The countries in the Pacific Alliance have consolidated as important actors at the
international trade scene. Several factors such that explain their increasing participation on
international trade included economic reforms, the negotiation of free trade agreements with
the main trade partners, the commodities boom, the internationalization of their companies
(multilatinas) and the expansion of their trade relations with the Asia-Pacific region. PA
exports grew at a 15% average during the last decade. PA’s exports to the world exceeded
US$ 558,000 million in 201310, equivalent to 3.1% of the world’s exports.
However, the PA maintains a high concentration in terms of its partners and a relatively low
intra-regional. 80% of exports of the region go to only three partners: the United States,
China and Canada. Also, about 80% of imports come from the United States, China and
Japan. These amounts contrast with the low intra-regional trade among PA economies.
Intra-PA trade in 2013, was US$19,475 million, barely 3.5% of the regional exports.
These figures demonstrate the strong links between the PA and APEC economies. Based
on 2013 figures, AP exports to APEC were US$ 432,946 million (about 78% of PA’s export
to the world) while imports from the APEC were US$ $ 428.096 million (about 76% of PA’s
imports from the world). While a bulk of these trade relations derives from Mexico’s relations
with NAFTA members, there are interesting trends to be observed on Asia- PA trade. PA’s
exports to Asia reached US$77, 118 million in 2013. This is 13.8% of its exports to the world.
PA’s imports from Asia were close to US$ 172,867 million, equivalent to 30.7% of this
group’s imports from the world. PA’s exports to Asia grew at 18% average over the period
2008-2013, while imports grew at an average of 16% over the same period. In other words,
in terms of trade, members of the Pacific Alliance, are more integrated with other APEC
economies in Asia than among themselves.
Table 2: Pacific Alliance exports: intra-regional, to APEC and world (US$ millions)
PA
% Expo
to world
Asia
% Expo
to world
APEC
% Expo
to world
World
Chile
4,153
5.4%
37,404
48.3%
50,267
64.9%
77,367
Colombia
3,710
6.3%
9,152
15.6%
29,066
49.4%
58,822
Mexico
8,591
2.3%
17,910
4.7%
329,061
86.6%
380,096
Peru
3,022
7.2%
12,652
30.2%
24,552
58.6%
41,871
Total
19,475
3.5%
77,118
13.8%
432,946
77.6%
558,156
Source: Authors based on Comtrade (2014)
Table 3: Pacific Alliance imports: intra-regional, to APEC and world (US$ millions)
10
The authors used 2013 data because at the moment of collecting information for this paper (February, 2015)
trade data for Peru in 2014 was preliminary.
8
PA
% Impo
% Impo
Asia
world
% Impo
APEC
world
world
World
Chile
6,031
7.6%
24,450
30.7%
45,712
57.4%
79,616
Colombia
8,207
13.8%
16,208
27.3%
40,081
67.5%
59,381
Mexico
2,935
0.8%
118,092
31.0%
315,986
82.9%
381,210
Peru
4,614
10.6%
14,117
32.6%
26,317
60.7%
43,357
Total
21,787
3.9%
172,867
30.7%
428,096
75.9%
563,564
Source: Authors based on Comtrade (2014)
In 2013, the largest exporter to Asia was Chile with US$ 37,404 million, followed by Mexico,
Peru and Colombia. The main importer from Asia was Mexico, with US$ 118,092 million,
followed by Chile, Colombia and Peru. These figures evidence the existence of a
considerable trade deficit between the PA and Asian economies. This situation is mainly
explained due to Mexico’s significant trade deficit and to a lesser extend Colombia. This
situation is contrasted against Chile and Peru that in recent years often had positive trade
balances with Asian economies. The most important trade partners in Asia for PA economies
are: China, Japan, India, and Korea in terms of both imports and exports. These four
economies are observers in the PA process.
Table 4: Pacific Alliance exports to selected Asian economies (US$ millions)
Chile
Colombia
Mexico
Peru
Total
Total Asia
37.404
9.152
17.910
12.652
77.118
Australia
801
48
988
131
1.968
Brunei Darussalam
0
0
5
-
5
Cambodia
1
2
1
0
4
China
19.219
5.102
6.465
7.342
38.128
Korea
4.272
230
1.525
1.541
7.568
Philippines
157
13
105
128
403
Hong Kong
177
78
957
86
1.298
India
2.304
2.993
3.525
593
9.415
Indonesia
231
15
213
105
564
Japan
7.661
388
2.241
2.228
12.518
Laos
0
-
1
-
1
Malaysia
228
107
176
56
567
Myanmar
2
-
2
0
4
9
New Zealand
38
12
112
23
185
Singapore
119
61
577
21
778
Chinese Taipei
1.645
40
487
212
2.384
Thailand
242
44
425
141
852
Vietnam
307
19
105
45
476
Source: Authors based on Comtrade (2014)
Table 5: Pacific Alliance imports from selected Asian economies (US$ millions)
Chile
Colombia
Mexico
Peru
Total
Total Asia
24.450
16.208
118.092
14.117
172.867
Australia
414
64
518
133
1.129
Brunei Darussalam
0
0
0
0
0
Cambodia
17
11
75
7
110
China
15.702
10.363
61.321
8.399
95.785
Korea
2.771
1.296
13.493
1.590
19.150
Philippines
41
48
1.593
30
1.712
Hong Kong
122
78
289
19
508
India
739
1.144
2.868
723
5.474
Indonesia
186
220
1.149
206
1.761
Japan
2.495
1.479
17.076
1.439
22.489
Laos
0
0
1
0
1
Malaysia
262
198
5.379
200
6.039
Myanmar
2
0
6
0
8
New Zealand
112
12
371
81
576
Singapore
74
113
1.456
58
1.701
Chinese Taipei
472
557
6.689
443
8.161
Thailand
759
309
4.322
654
6.044
Vietnam
282
316
1.486
136
2.220
Source: Authors based on Comtrade (2014)
The PA economies have negotiated a series of bilateral trade agreements as an instrument
of trade liberalization. Their FTAs network extends to all regions of the world and includes
both developed and developing partners. At the APEC level, there are over 25 FTAs
currently in place between PA members and APEC economies (excluding Chile, Mexico and
Peru as they are also part of the PA). APEC economies such as the United States and
10
Canada, have already negotiated comprehensive FTAs with all the PA economies, thus
reaffirming the importance of the linkages between the two regions.
The FTA negotiation between PA members and economies in Asia also offers some
interesting insights. While Chile and Peru already have a number of FTAs with Asian
economies, the establishment of this type of agreements is an ongoing process for them as
much as it is for Mexico and Colombia that only have one of such agreements with an Asian
economy. Mexico has an Economic Partnership Agreement (EPA) with Japan since 2005,
while Colombia ratified its FTA with Korea in 2014. To date, members of the PA continue to
conduct its trade negotiations with Asia individually. Following the signature of PA’s
Framework Agreement June 2012, Colombia began negotiations for an EPA with Japan in
December of that year, while Chile did the same with Indonesia in May 2014.
The greatest progress in terms of tariff reductions has been made with Japan and Korea. All
PA economies have a current agreement with Japan, except for Colombia that is under
negotiation. Chile, Peru and Colombia have existing agreements with Korea; while Mexico
has raised the possibility of resuming negotiations with Korea suspended since 2008 (Kim,
2013). Other observers in Asia such as China and Singapore also have agreements with
Chile and Peru that could be used by PA members as an export platform to these markets.
Table 6: Pacific Alliance FTAs with observers and selected Asian economies.
Status
Pacific Alliance
Observers
FTA
Chile
Colombia
Mexico
Peru
Australia
2009
China
2006
Korea
2004
India
2007 (a)
Japan
2007
New Zealand
2006 (b)
Singapore
2006 (b)
Costa Rica
1999
Neg.
2011
2011
Ecuador
2008
1997 (d)
1983
1997 (d)
El Salvador
1999
2007
2011
Neg.
Guatemala
1999
2007
2011
Neg.
Honduras
1999
2007
2011
Neg.
Panama
2006
2013
2014
2011
Paraguay
1996
2005 (d)
2002
2005 (d)
2010
2013
Neg.
2011
Neg.
2005
2012
2009
Dominican Rep
Trinidad & Tobago
1998
11
Uruguay
1996
2005 (d)
2002
2005 (d)
Canada
1996
2008
1994 (c )
2008
United States
2004
2012
1994 (c )
2009
EU members*
2003
2013
2000
2013
2013
2000
2001
Israel
Morocco
Switzerland
2004
2011
Turkey
2011
Neg.
Brunei Darussalam
2006 (b)
2011
Neg.
Cambodia
Other Asian
Economies
Hong Kong
2014
Indonesia
Neg.
Philippines
Laos
Malaysia
2012
Myanmar
Thailand
2012
Vietnam
2014
2011
* Germany, Belgium, Spain, Finland, France, Italy, Netherlands, Portugal and United
Kingdom
Signed and in force
Signed but not yet in force
Neg.
Under negotiation
Source: Authors based ADBI FTAs database (2014)
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4. Parallel between the Pacific Alliance and other FTAAP Pathways
The following section assesses PA’s goals and achievements in comparison to the objectives established on TPP and RCEP
negotiations. The table includes the relevant matters of regional economic integration such as tariff barriers, trade facilitation, services
and investment liberalization, as well the most important new generation issues such as intellectual property, environment, public
procurement, competition and labour. Based on the assessment, in most areas the PA is an intermediate alternative between a highstandards TPP process and a more shadow RCEP liberalization. TPP and RCEP assessment is based on Petri & Abdul-Raheem
(2014) on the PECC State of the Region (2014) and the PA assessment is based on official documents, in particular the PA Additional
Protocol to the Framework Agreement (2014) and PA’s presidential declarations. At his point, it is important to keep in mind that the three
agreements (TPP, RCEP, and even the PA) are ongoing processes.
Table 7. Comparing the Pacific Alliance and other FTAAP pathways
Transpacific Partnership (TPP) Regional Comprehensive
Economic Partnership (RCEP)
Market
 Elimination of tariff barriers
 Progressive elimination of tariff
Access
with significant WTO+
and non-tariff barriers on
commitments.
substantially all trade in goods
 Elimination of non-tariff
 Comprehensive and high level
barriers
of tariff liberalization
 Negotiated market access
and trade facilitation for textile
and apparel
Trade
 Predictable, transparent and
 Facilitate trade and investment,
facilitation
expeditious customs
enhance transparency in trade
procedures.
and investment
 Strong and common rules of
 Facilitate regional and global
origin
value chains
 Build WTO commitments on
SPS and TBT measures.
Pacific Alliance (PA)






Immediate liberalization based on
previous commitments among PA
members under their bilateral FTAs
Progressive elimination of tariffs on
the rest of the products
Negative list approach but limited
exceptions.
Elimination of non-tariff barriers
Harmonized rules of origin system
and rule of origin accumulation
system.
Comprehensive commitments on
SPS and TBT (special committees
were created)
13


Facilitate regional value
chains



Services




Investment


Competition

Fair, open and transparent
markets for services across
borders, while preserving the
right to regulate
Open trade and investment in
financial services, ecommerce and
telecommunications
Negotiate on negative list
basis
Transparency and efficiency
in temporary entry

Liberal access for investment
and legal protection for
investors
Expeditious, fair and
transparent investor-state
dispute settlement
Promote competitive
business environment,



Substantially eliminate
restrictions and discriminatory
measures on trade in services
Build on commitments made by
RCEP members under WTO
and ASEAN+1 FTAs.
Negotiate on all sectors and
modes of supply







Liberal, facilitative, competitive
investment regime
Negotiate on promotion,
protection, facilitation and
liberalization

Promote competition, economic
efficiency, consumer welfare,


Information exchange between
customs authorities
Simplify customs procedures
Mutual recognition of Authorized
Economic Operators
Facilitates Single Windows
interoperability.
Comprehensive agreement in terms
of services liberalization
Enhances service liberalization visà-vis the previous FTAs among
members
Covers five key sectors (GATS+)
Addresses issues that were absent
from bilateral FTAs such as ecommerce, and maritime
transportation services
All PA economies are involved in
Trade in Service Agreement (TISA)
negotiations
Investment promotion and
protection contemplates the
elements of MFN, national
treatment for investors.
Created the Joint Committee on
Services and Investment
Promotes competition and antimonopoly practices.
14

Intellectual
property




Dispute
resolution

Cooperation

protect consumers, ensure
level playing field
Establishment and
maintenance of competition
laws and authorities, fairness,
transparency, consumer
protection, private rights
Ensure effective and
balanced intellectual property
rights
Reinforce and extend WTO
TRIPS
Cover trademarks,
geographical indications,
copyrights, patents, trade
secrets, data exclusivity
Cover intellectual property
enforcement, genetic
resources and traditional
knowledge
Clear and effective rules for
resolving disputes
Focus on needs of
developing member
economies in implementing
high-standard provisions
curtailing anti-competitive
practices
Recognize differences in
capacity in RCEP on
competitive policy

Build on the competition
agreements included in the previous
FTAs among members.
Reduce intellectual property
related barriers to trade and
investment
Promote cooperation in
utilization, protection and
enforcement of intellectual
property rights.


Ongoing negotiation
Working Group to prepare and
implement a work plan with joint
and specific cooperative actions
between intellectual property offices
Cooperation activities in three
areas: Copyright, Industrial Property
and Cross-Disciplinary Aspects

Effective, efficient and
transparent process for
consultation and dispute
resolution.



Build on cooperation
agreements between ASEAN
and dialogue partners





Clear and effective rules.
The group has established
committees to solve SPS, TBT, and
Investments disputes and a
committee on regulatory coherence.
Cooperation on: SMEs;
Environment and Climate Change;
Innovation, Science and
15

Establish institutional
mechanism for cooperation
and capacity building

Focus on development gaps in
RCEP and maximize mutual
benefits.


Accession

Open to all APEC economies


Environment 

Government 
procurement

Address trade and
environment challenges
Discuss maritime fisheries,
conservation, biodiversity,
invasive species, climate
change, environmental goods
and services.
Ensure fair, transparent, nondiscriminatory government
procurement
Comparable coverage by all
economies; transitional
arrangements for developing
economies
ASEAN FTA partners may join
negotiations as agreed by
negotiating members
Accession clause to enable
other ASEAN FTA partners to
join RCEP









Technology; Social Development;
Education and Tourism
Student and Academic Mobility
platform.
Cooperation program to improve
SME competitiveness
MOU on tourism cooperation
There is an accession clause that
allows PA observer members
adhere to the agreement.
The adhering country must have a
comprehensive FTA at least with
one of the members.
Ongoing negotiation
Environment and climate change
cooperation.
Scientific Research network on
Climate Change
Common regulatory framework on
public procurement.
Updates previous bilateral
provisions on transparency, national
treatment, non-discrimination,
dispute settlement and public eprocurement
Promotes SMEs participation on
public procurement.
16

Eliminates existing reservations on
public procurement.
Labour
 Address labour rights
 Ongoing negotiation
protection and ensure
 Member countries eliminated visa
cooperation, coordination and
requires for tourism, transit and
dialogue
business travels.
 Restricted labour mobility.
 Cooperation towards academic
homologation on some professions.
Based on: Petri & Abdul-Raheem (2014) for TPP and RCEP and Alianza del Pacífico (2014a), (2014b), Direcon (2014) for PA.
17
Conclusions: Is the Pacific Alliance a pathway potentially leading toward the FTAAP?
Over recent years, the Pacific Alliance members have developed important trade links with
the Asia- Pacific economies, thus confirming the strategic importance of this region to the
group. The relationship with North America could be largely attributed to the huge trade
flows between Mexico and other NAFTA members, and due to the historical trade
dependency between Chile, Colombia and Peru from the United States. The strengthening
of trade relations with Asia-Pacific, meanwhile, is a more recent process and has been
frequently mentioned as one of the PA’s strategic goals. Several economies in the region,
particularly China, Japan and Korea, are already among PA’s most important trading
partners. As a consequence of the growing trade links between these regions, there are
more than 15 free trade agreements in force between PA’s members and a number of AsiaPacific economies. However, this diversity of FTAs are also evidence of the lack of an
integrated approach to achieve trade, services and investment liberalization between the
two regions. This is the most important challenge ahead for the region.
The PA process has a series of opportunities to serve as a platform for Asia-Pacific
integration, beyond its current Latin American members, and consolidate itself as a more
solid pathway leading to regional integration in the form of the FTAAP.

The PA was created with the foundation objective of enhancing its
members’ trade and diplomatic relations with the Asia-Pacific region.
The group is willing to find scenarios for integration, trade and
cooperation with regional economies. The FTAAP would be one of
such scenarios. Furthermore, after nine presidential summits and
changes in the governments in Chile, Mexico and Peru, the group
maintains high-level commitment with the process and its
foundational objectives.

The PA is a “living agreement”11 that welcomes observer members to
join the process and where the parties have agreed to include new
topics as the negotiations evolve. This flexibility is very important in
the light of the potential interest of other Asia-Pacific economies to
join the process or the eventual need to incorporate new disciplines
into the agreements as it evolves.

Based on the provisions negotiated among PA members on areas of
tariffs, trade facilitation, services & investment liberalization, and new
generation issues such as intellectual property, environment, labour
and public procurement, the group offers an intermediate level of
integration. The PA is not as ambitious as the TPP, hence could be
Opportunities
11
See Fergusson et al (2013) for the concept of “living agreement” in the context of the TPP.
18
more interesting for APEC economies that are not ready or not willing
to commit to TPP high-level conditions. At the same time, the PA
offers a deeper form of integration that the RCEP.

All PA member economies are part of Trade in Service Agreement
(TISA) negotiations. The fact that all PA members are part of this
negotiation platform on services constitutes a strength compared to
TPP and RCEP initiatives (not all their members are part of TISA).
This further enhances PA position in the centre of regional integration.
The TISA negotiations also include other nine APEC economies
(Australia, Canada, Hong Kong, Japan, Korea, New Zealand,
Chinese Taipei and the United States).

Latin American economies are currently leading the PA process, and
as such there are not antagonisms (i.e. TPP not including China vs.
RCEP not including the United States). As observers, both United
States and China, are following the process and based on the PA
accession rules, would be welcome to join the agreement in the future.
United States already has comprehensive FTAs with all PA members,
while China has done so with Chile, Peru and Costa Rica (future
member). The PA also includes India among its observers, so it could
be an agreement that solves the issue of India not being part of APEC,
hence not being able to join TPP negotiations.

Chile, Mexico and Peru are part of APEC economies and TPP
process. As such, they have a higher level of coordination with other
regional economies. This could be solved with Colombia’s accession
to APEC, further involvement on APEC working group and/or the
establishment of a common APEC strategy among PA members.
The PA is long overdue to establish a common strategy that integrates its member’s efforts
towards greater integration to Asia-Pacific. The common strategy should include elements
of diplomacy, negotiation of comprehensive trade & investment agreements, economic and
technical cooperation between PA members and other Asia-Pacific economies. As an
ongoing process, this is particularly crucial in a context where major integration initiatives in
Asia-Pacific, such as the ASEAN Economic Community, TPP, and RCEP are taking place.
The establishment of a coordinated PA & Asia-Pacific strategy would the first step toward
the consolidation of the PA as an alternative pathway leading to the FTAAP. Such strategy
would set the foundations to incorporate more Asia-Pacific economies in the negotiation
process, to establish more efficient interaction channels with groups such as ASEAN, and
to negotiate more comprehensive trade agreements with Asia. This is one of the most urging
challenges for PA governments, but also one of the most promissory opportunities.
19
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