A new Latin American trade bloc has caught the eye of Canada, one that analysts say has the potential to become a "centre of gravity" in the Pacific Rim, and that could eventually hold the country's sustained attention alongside its pursuit of the Trans-Pacific Partnership and the South American bloc Mercosur.

The Alianza del Pacifico, or Pacific Alliance, is a recent deal between Colombia, Chile, Peru, and Mexico—the latter three of which are involved with the TPP. A framework agreement for the alliance was formally signed in June 2012 at the group's fourth presidential summit in Chile, and the next meeting is on Aug. 29 in Mexico.

One expert says the group, which has a combined GDP of close to $2 trillion, is gunning for the full freedom of movement of goods, services, capital, and people—integrating everything from police co-operation to certain customs rules, visas, and money markets—and has announced its intention to scrap visas for travel between member countries.

That makes the alliance similar to the Mercosur group that includes Brazil, Argentina, and Uruguay, one that the Harper government has tried for years to land a deal with and which accounts for more than $3 trillion in combined GDP.

But in July that bloc added Venezuela to its mix, a country that observers point out has had less than stellar relations with Canada. Former minister of state of foreign affairs for the Americas Peter Kent, for example, expressed concern in January 2010 over the "shrinking democratic space" in that country.

In a related but separate development, three of the four alliance countries have also forged ahead with a common stock market, the Mercado Integrado LatinoAmericano, and Mexico, Canada's NAFTA partner, has expressed interest in joining as well.

All this means that as the Harper government conducts cross-country consultations on how to alter its Global Commerce Strategy, it could be thinking about whether to cozy up to the Pacific Alliance.

Foreign Minister John Baird, who flew to Chile for the alliance's summit on June 6 in place of Prime Minister Stephen Harper—who was invited, but was attending the Queen's Jubilee in Britain—gave strong indications that Canada is interested.

"The formation of new trading blocs and new partnerships holds great promise for all of our countries," he said, according to prepared speaking notes.

"This alliance can create prosperity in the Americas and opportunity throughout the Pacific."

Canada is interested, said Mr. Baird, because the country already has trade deals with all of the founding members, as well as with observer Costa Rica. As well, Japan, Australia, and Panama—other countries with which Canada already has, or is forging trade ties—also sent representatives to witness the June meeting.

Canada is not planning on attending the Aug. 29 meeting, but will remain in "regular contact" with member states, wrote Jessica Séguin, a spokesperson for the Department of Foreign Affairs and International Trade, in an email to Embassy.

Asia Pacific sights

Other than the trade deals making Canada a natural fit, there are several other reasons Canada's attention might be increasingly fixated on the new bloc, say observers.

Latin American expert Carlo Dade, who is a senior fellow at the University of Ottawa's School of International Development and Global Studies, has authored a forthcoming paper on the Pacific Alliance—a draft of which was obtained by Embassy.

He argues that the alliance has a few things going for it that other organizations don't—agility, and momentum.

Mr. Dade argues that the alliance was thought up after years of waiting for yet another trade bloc, the Arc of the Pacific, to get off the ground. In 2007, then-Peruvian president Alan Garcia proposed the formation of the bloc which would involve both several Latin American countries and Canada. It eventually grew into 11 members.

But Mr. Dade writes that the four leading players in the Arc—Chile, Colombia, Peru, and Mexico—decided they "had had enough with the inability of the other seven members to do anything, and that it was time to cut their losses and get on without them."

Alliance countries already have more trade agreements with Asian nations than other Latin American trading blocs, Mr. Dade argued. Now, he said, the group can move forward with attracting investment from big Pacific players like China and the United States.

"The Americans are all about linking their trade agreements from Tierra del Fuego all the way up to the Yukon into one agreement with Asia," he said.

The US is also supportive of the alliance, he continued, citing US Secretary of State Hillary Clinton's meeting with the group's heads of state at the Summit of the Americas in Cartagena, Colombia in April. And given the economic integration with Canada, wherever the US plants its trade roots, its northern neighbour often follows.

Eric Farnsworth, vice president of the Council of the Americas, agreed that the alliance was "a way to advance further and faster in the Asia Pacific," and was "creating a centre of gravity that is going to be too hard for the US to ignore."

Inter-American Dialogue President Emeritus Peter Hakim also argued that the "flourishing" of new organizations in Latin America was the result of a collapse of hemispheric-wide efforts like the Free Trade Area of the Americas.

Mr. Farnsworth cautioned, however, that the combined market is still largely eclipsed by the Chinese, European Union, or US GDPs, and that the group was still in early days. The TPP, as well, collectively accounts for nearly a third of the entire world's GDP, putting it in a league of its own.

The TPP factor

Nevertheless, Mr. Dade argued that an alliance deal might be attractive to Canada because it could be easier to get done than the TPP.

With the addition of the US, the Pacific Ocean partnership must now wait until the US Senate passes the treaty, something that has been a notoriously long process in the past, he said.

"The Obama administration is optimistic that the votes will be there; they are alone in that optimism," he wrote.

While the TPP had Latin American founding members, argued Mr. Farnsworth, with the addition of the US, and now Canada and Mexico, the organization has taken on more of a North American-Asian feel. Few people in Washington, he said, now think of the TPP as strategic engagement with the Western hemisphere.

"In that context, I think that the...Pacific Alliance is very relevant, because if people in Washington were thinking strategically, they would be looking at ways to incorporate the Pacific Alliance into the TPP, because a lot of the good work has already been done," he said.

But Mr. Hakim cautioned against assuming too much as well, suggesting that the TPP was just as new an institution as others and thus may have growing pains.

For its part, the Harper government said it is reviewing both individually.

"As a Pacific nation, Canada's interests in the Trans-Pacific Partnership and in the Pacific Alliance are based on each initiative's merits," wrote Ms. Séguin.

"In both cases, we are working with some of Canada's most like-minded partners in the Americas and in Asia to promote mutual interests and prosperity."

Spokespeople from the Mexican, Colombian, Peruvian, and Spanish missions did not immediately respond to requests for comment.

August 29, 2012

Source: Parliament Now - Canada Embassy

• Viet Nam’s trade surplus with EU expands amid economic headwinds
• Steel, cement and electricity firms to trade emissions quotas under Viet Nam's carbon market
• VCCI proposes 11 recommendations to quantify support for SMEs
• Trump’s copper tariff decision hangs over global metal market
• Global capital sees potential in Europe but calls for lighter regulation