Trade and Investment Relations in the Pacific Alliance: Recent Developments and Future Trends

Abstract

The Pacific Alliance (PA) was initiated to promote trade and investment linkages among its four members and to provide a platform for enhanced integration between Latin America and the Asia Pacific region. This chapter addresses both aspects. First, it describes the bilateral flows of trade in goods at the product and sector level, as well as trade in services and foreign direct investment data. The PA’s deep integration ambitions have reached a heightened level of commitment as a result of the entry into force of the Additional Protocol of the Framework Agreement of the Pacific Alliance in May 2016. This step will not only immediately eliminate tariffs on nearly 95% of intra-regional imports, but also foster economic integration through cumulation of origin and trade facilitation provisions. The chapter also examines the potential to increase the region’s participation in global value chains, building upon the existing strong linkages within the integration scheme. In light of the uncertain status of the TPP, the PA may serve as a bridge between Asia Pacific and Latin American countries. Future relations with the countries on both sides of the Pacific are discussed, with the current accession process of Costa Rica and Panama exemplifying the first significant challenge to the PA’s ambitions.