The Pacific Alliance and International Trade

The Pacific Alliance is a regional integration initiative and trade bloc comprised of Chile, Colombia, Mexico, and Peru. Created in 2012, the Pacific Alliance brings together a territory of almost 5.2 million square kilometers, which is larger than India, and a total population of approximately 220 million citizens, which is little less than Indonesia’s total population. Currently, the President pro tempore of the Pacific Alliance is the Colombian Head of State Juan Manuel Santos and the aggregate nominal (not PPP) gross domestic product (GDP) of all four countries is of about US$2 trillion. This means that the Pacific Alliance accounts for almost half of Latin America’s trade (both exports and imports) as well as more than a third of the regional GDP.

The Pacific Alliance and International Trade

Even though the Pacific Alliance is relatively new and the economies of the four member countries are not intricately integrated, the Alliance does give the governments more leverage when bargaining as a trade bloc. Given that the Pacific Alliance’s main mission is to promote the economic project of its member states towards the markets of Asia Pacific, the respective governments have sought greater interaction with regional fora, such as the Asia Pacific Economic Cooperation (even though Colombia does not formally belong to APEC) and the now defunct Trans-Pacific Partnership (TPP).

In recent months, the governments of Australia and New Zealand have been pushing for negotiations of a Free Trade Agreement (FTA) with the Pacific Alliance. During 2016, the two-way trade between Australia and Pacific Alliance members totaled US$4.6 billion. Therefore, such a trade agreement has great multilateral potential. In 2015, Australia imported US$192 billion and exported US$190 billion, resulting in a trade deficit of US$2 billion. Furthermore, Australia’s main trade partners were China, the United States, Japan, and South Korea, which means that there is great potential for Australia to increase its trans-Pacific trade with Latin America. Similarly, during 2015, New Zealand imported US$35.7 billion and exported US$35.8 billion, resulting in a trade surplus of US$72 million. Meanwhile, New Zealand’s main trade partners are China, the United States, Japan, and Australia, which also means that New Zealand has great potential to increase its trans-Pacific trade relations with Latin American partners.

On the other side of the Pacific Ocean, Colombia’s main trade partners are the United States, China, the European Union, and other Latin American countries, which also suggests the potential for trade synergies with Australia and New Zealand, particularly given the fact that Colombia’s most important port is Buenaventura on the Pacific coastline. Likewise, Mexico, during 2015, imported US$377 billion and exported US$391 billion, for a trade surplus of US$14 billion. However, Mexico’s main trade partners are the United States, Canada, China, Japan, and the European Union, suggesting that its trade with more nations in the Asia Pacific region has great potential.

The thoughts of CEO Dax Cooke and all of Farmfolio’s team are with Mexico and New Zealand, both of which were struck by powerful earthquakes earlier this week.

(Read more about New Zealand: Cereals and Trade in the Southern Pacific)