By Carlo Dade | May 21, 2013This week's trip by the Prime Minister and Trade Minister to Colombia for the Pacific Alliance Summit is more than just another trip south; it is shaping up to be the most critical test of the country and government's seriousness and ability to diversify Canadian trade away from the U.S. and take advantage of the new opportunities in global trade.The test is whether Canada is ready to join the Pacific Alliance, an initiative, occurring with truly remarkable speed and success. A key goal of the Pacific Alliance is to seamlessly link the economies of Chile, Peru, Colombia, Mexico and soon Panama and Costa Rica to facilitate trade with each other and Asia. The countries are using their free trade agreements to launch a unified set of “platinum class” standards for the movement of goods, services and people to promote trade between the bloc and between the bloc and Asia.This is not an unimportant occurrence; together the Pacific Alliance countries are the world's 8th largest economy and the 5th BRIC. Amongst the BRICS, the Pacific Alliance would be the 4th largest by GDP, the 2nd richest by per-capita GDP and, by trade, the 2nd most important BRIC for Canada. It is also the BRIC with which Canada has the best relations.
That no one in Canada has heard of the Pacific Alliance, let alone understands its importance, is worrying but not surprising given the lack of capacity in Canada to follow events in the region. The same cannot be said for Asia and Europe where the development of the Alliance has attracted interest and attention.The Alliance's goal to compete with and in Asia is largely Canada's goal as well. In its specifics the agenda of the Alliance will sound even more familiar in western Canada. It is the New West Partnership (NWP) but instead of internal bickering the Alliance has demonstrated an unprecedented level of political leadership and commitment through changes in government. It also has an institutional basis and technical resources, through the Inter-American Development Bank, that are wholly lacking in the NWP, and arguably even in Canada. As a result the Alliance has a record of accomplishment and a pipeline of activities that are absent in the NWP or any other integration scheme around the globe.The bloc has attracted and is attracting more attention from Asia than is Canada. Indonesia is pushing for the Association of South-east Asian nations to begin negotiations with the Alliance. No ASEAN country is making the same request for Canada.
Part of the reason for the Alliance's success -- compared to the frustration and failure of similar initiatives in North America -- is the absence of the Americans.And this may be the most interesting and rewarding aspect of the Alliance for Canada; a chance to actually get things done.
Canada and several of the Alliance countries -- Mexico, Peru and Chile -- are also part of the on-going Trans-Pacific Partnership (TPP) negotiations. This is an attempt to establish an even larger pan-Pacific trading area.A larger pact is potentially more lucrative and offers more opportunities. But a larger group also creates more, and more complex, problems. The TPP group includes eleven widely disparate countries from New Zealand to Brunei dar es Salaam, to Vietnam, to Japan. Unlike the Pacific Alliance, most of these countries do not have free trade agreements so even simple items are problematic.But the larger issue with the TPP is political. Even if the eleven negotiating teams can forge an agreement it would still need ratification. And no one is optimistic that the U.S. Senate could do this at all, let alone expeditiously. The extent of difficulty that trade pacts pose for U.S. legislators is simply not understood or appreciated outside of the U.S. And the more, and more disparate, the countries involved, the more difficult this becomes.The TPP will eventually pass; it is too important not to, and as Winston Churchill noted, the U.S. always does the right thing – after first trying every other possible option. This is why Canada fought so hard to join. But, in the years it will take the TPP to come into being, Canada can benefit from membership in the Pacific Alliance and from taking a leading role in establishing rules and precedents for trade with Asia that the TPP would likely be forced to adopt or incorporate. This may be the best chance to actually achieve and protect Canadian interests in trans-Pacific trade.The Pacific Alliance countries have made clear that they are interested in having Canada become a full member. Making that a reality though is not a certainty and Canada's major competitors have also expressed interest and will also be in Cali this week.But Canada is better positioned than its competitors for entry in the Pacific Alliance. Canada already has trade agreements with all Alliance members and prospective members and more importantly Canada alone has been an observer to the group and its predecessor, the Arc of the Pacific, since that group's founding in 2007. When the idea for a new trade bloc along the Pacific coast of the Americas was first floated at the Asia Pacific Economic Cooperation meeting in Australia in 2007 Prime Minister Harper received an informal and spontaneous invitation from President Garcia of Peru to join in a meeting with the Presidents of Mexico and Chile. The Prime Minister was quick to accept and quicker yet to pick up on the potential of what his colleagues were proposing, especially as his government was on the verge of concluding negotiations with two of the four founders of the Pacific Alliance.The government has been prudent in sticking with the group to watch as it has grown, matured and proven itself. Canada is now positioned well in advance of its principle competitors in the region -- Spain in finance, Australia in mining and the U.S. in agriculture and everything else -- to seize a huge competitive advantage. Joining the Alliance should be a slam dunk, yet one issue may derail this – visas or, more correctly, Canada's fear of refugees.To read the PMO press release regarding the Cali Summit, click here.Read Carlo Dade's analysis of the Pacific Alliance Leaders' Summit in the next issue of the Macdonald-Laurier Institute's Inside Policy magazine.Carlo Dade is currently a Senior Fellow at the School for International Development and Global Studies at the University of Ottawa. His research focuses on the role of private sector actors in international development, Canadian engagement in Latin America and trans-Pacific trade. He is also a foreign policy columnist for Embassy newspaper, Canada's only foreign affairs weekly. He served for five years as Executive Director of the Canadian Foundation for the Americas, (FOCAL) Canada's only think tank devoted to the western hemisphere. While Executive Director of FOCAL, he initiated and served as Canadian Director for the Canada-Mexico policy research and dialogue initiative undertaken with the Mexican Council on Foreign Relations. Mr. Dade began his career serving for five years in the Latin American and Caribbean Region Technical Department of the World Bank. Most recently he has authored a forthcoming paper on the history and development of the Pacific Alliance and Arc of the Pacific Trade.