LatAm eyes "natural progression" on trade amid NAFTA talks
June 13, 2018 |
Regional economies chart myriad of benefits from a renegotiated agreement, while intra-regional flow needs to increase
Latin America could benefit from the U.S. government’s new aggressive position on trade. Edgar Vásquez, Peru’s deputy trade minister, says the renegotiation of the North American Free Trade Agreement (NAFTA) between Canada, Mexico and the US should be seen as an opportunity to update what was the ground-breaking trade agreement for the world 24 years ago.
“If you analyze the renegotiation technically, it is a natural progression. A lot of water has passed under the bridge since NAFTA was signed. It is necessary to upgrade it,” said Vásquez during LatinFinance’s 12th Andean Finance & Investment Forum in Lima, Peru.
NAFTA negotiations bogged down in May and will likely be put on hold as Mexico heads toward its presidential election in July.
US President Donald Trump’s take on trade, and tariffs being applied by the U.S and other countries in retaliation could actually have a silver lining for the region, helping Latin America ramp up intra-regional trade.
Nicolás Rodríguez, a partner at Jones Day, said the conflict between the US and Mexico could lead the region to take a look at the reasons behind low levels of trade.
“There is a lot of noise right now, but I do not think the impact will be as dire as some predict. It could also be beneficial in one sense, with countries in the region increasing their trade flows,” said Jones Day's Rodríguez.
Vásquez said only around 7% of the trade by the countries was in the region. Even the most dynamic block, the Pacific Alliance that joins Chile, Colombia, Mexico and Peru, have low levels of trade. Only 4% of trade flows of the four countries is within the block.
"There is no doubt that we need to work harder to increase intra-block trade,” he said.
The Inter-American Development Bank released a report in May revealing that increased trade flows could jump by $11.3bn based on 2017 flows if Latin American and Caribbean countries joined together in a free-trade agreement.
"Trade in the region is a complicated patchwork of preferential trade agreements anchored by its two main blocs, the Pacific Alliance and MERCOSUR,” which joins Argentina, Brazil, Paraguay and Uruguay, stated the report.
These agreements and an array of bilateral deals already eliminate tariffs on most goods in the region.