I am in Colombia — if things go well I will be spending more time here — and the news is full of the Pacific Alliance summit in Cali.
The Alliance has a very clever logo, combining the flags of the different countries.
But it is nothing more than a commitment to liberalize restricitions on the movement of goods, capital, and (eventually, maybe) people between Mexico, Chile, Colombia, and Peru. There is no secretariat, no courts, no bureaucracy. Its founding document is called simply the “Framework Agreement.” If you click the link, you can read it: it is just a list of objectives, with a few statements about intergovernmental cooperation.
In Cali this week, the leaders agreed to eliminate tariffs on 90% of products between them. That is nice, but the countries do not trade a lot between each other and barriers (except in agriculture) are already pretty low. (The link goes to WTO trade profiles for the four current members. You can specific tariff profiles for the four countries here.) Moreover, with no common external tariff, the countries will need to develop rules-of-origin. In addition, with no common bureaucracy or legislature, non-tariff barriers will continue to loom large. And with no dispute resolution mechanism, the countries will continue to rely on the WTO for enforcement.
In other words, there is not a whole lot of there there. If you are an exporter from one of the members looking at another, then it might matter (depending on which products are included in the 90% to be liberalized) but the macro impact will be tiny. If they liberalize labor flows, then I will change my tune, but call me skeptical.
The breathless declarations from the FT, the Miami Herald, and the Economist are really not warranted. In fact, at the end of the article the Economist called the Pacific Alliance “a brilliant piece of diplomatic marketing.” That sounds about right.
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