Canada and Associate Membership in the Pacific Alliance: An Important Part of a Global Trade Strategy

Abstract

There has been considerable coverage lately of Canada’s ongoing efforts to secure preferential access to overseas markets in Asia, while trying to save NAFTA and promote its “progressive” trade agenda. The “progressive” trade agenda hit a few recent road bumps, first in Vietnam in November when a planned announcement of an “agreement in principle” on the “TPP 11 Agreement” was postponed at the last minute, and in December in Beijing when Chinese authorities balked at including additional “progressive” chapters in a free trade agreement, the negotiation of which many expected would be announced during Mr. Trudeau’s visit. Although a breakthrough on the TPP11, now known as the Comprehensive and Progressive Trans-Pacific Partnership, was announced on January 23, NAFTA negotiations continue to be difficult. One area that has been overlooked in all the coverage of recent events, and which holds potential for advancing Canadian trade interests in both Latin America and the Asia Pacific, is the Pacific Alliance and Canada’s pursuit of associate member status. The PA trade pact, comprising Chile, Colombia, Mexico and Peru, is currently in the process of discussing with several countries, including Canada, the possibility of becoming “associate members.” Associate member status is novel, thus it is not clear what precisely it will entail or when it will come into effect. However, the possibility of Canada moving from its current "observer" status to becoming a more active part of the PA (or possibly an expanded version of the Alliance), offers significant benefit for Canada. For all the focus on the TPP and the NAFTA renegotiations, not to mention Canada’s recently concluded economic partnership agreement with the EU and potential free-trade negotiations with China, very little attention has been paid in Canada to the developments with the PA. And yet, this is one trade bloc that holds some of the greatest promise for Canada. All four founding countries are historic allies of Canada with likeminded systems of values of trade openness. Canada already enjoys strong bilateral relations with each of the PA members, but a multilateral agreement could offer Canada far more in terms of market integration. The PA also happens to offer Canadian exporters a very attractive market, with a population of 219 million, a very young average age (29.8 years) and a GDP per capita, at US$17,500, higher than that of China’s US$14,600. The PA nations are all also ranked among the most hospitable places to do business in South America. Meanwhile, as the Regional Comprehensive Economic Partnership (RCEP) involving 16 Asia Pacific nations moves closer to reality, there are suggestions that it could someday merge with the PA, possibly opening the door for Canada to yet more opportunity comprising half the world’s population and 40 per cent of its GDP. First Canada has to make the most of its opportunity to become an associate member of the PA. With the NAFTA negotiation crisis occupying so much bandwidth in Ottawa, there is a risk that the PA opportunity might not get the attention it deserves. Canadians should hope that it does. Because if NAFTA ends up failing, the PA could provide some of the new trade opportunities Canada will desperately need.