Trade bloc in Latin America set to promote globalism

A group of Latin American countries have set themselves up as the next champions of globalization. Their efforts to combat the rising tide of trade protectionism and nationalism could not come at a more opportune time.

The push was in evidence in mid-July, when the presidents of Chile, Colombia, Mexico and Peru met to discuss how to expand the reach of the Pacific Alliance trade bloc, of which they are members.

"We have new problems: global warming, tariff war, aging population, but we also have new tools that we never had before," said Chilean President Sebastian Pinera. He called on the alliance and its growing list of partners to "show the world the path and the leadership to make the opportunities stronger than the difficulties".

None of the four member countries of the Pacific Alliance－which has a combined population of 225 million and combined nominal GDP of almost $2.2 trillion－are global powerhouses. And that is what makes their stance for globalization even more impressive. The bloc has come to realize that countries are better off working together than against one another, and that nationalism and trade barriers are self-defeating.

Their push is even more remarkable because it is happening in Latin America, which has a long history of nationalistic governments.

Over the past few years, several Latin American heads of state have opposed the Pacific Alliance and the ideas it espouses, including Rafael Correa, the former president of Ecuador.

The bloc aims to build a sprawling trade network, in global scope not unlike the China-proposed Belt and Road Initiative. It now wants to bring in more partners and create trade deals with countries near and far, including Ecuador and South Korea, Australia, Canada, New Zealand and Singapore.

Just as significantly, the Pacific Alliance is considering merging with another regional bloc in Latin America－Mercosur.

Mercosur, an economic and political bloc founded in 1991, includes Argentina, Brazil, Paraguay and Uruguay.

A merger of the Pacific Alliance and Mercosur would create a much larger bloc that would account for about 86 percent of Latin America's economy and four-fifths of its population. That is about half a billion people and economic output of $4.6 trillion. The economic output alone would make it the fourth-largest economy in the world, ahead of Germany.

A merger of these two groups, if or when it comes to pass, would be a boon for the global economy. It should be supported and even encouraged.

During the first summit in July last year, the two groups agreed to strengthen their integration and reaffirmed a commitment to preserving and strengthening the multilateral trading system.

In many ways, the current push for greater integration marks a remarkable turnaround for Latin America, a turnaround that has played out over the past half-century.

The leaders of the Pacific Alliance and Mercosur have only to look at their potential partners in Asia for reasons to push for greater globalization. Without globalized trade, the almost magical rise of Asian economies like South Korea, Japan, Singapore and China over the past few decades would not have been possible.

As Asian economies were tailoring their economies for global trade starting in the 1960s and '70s, Latin American countries were toying with protectionist policies of import substitution, in essence looking to manufacture goods domestically rather than importing them. They did this through tariffs that made imports very expensive.

Those efforts did not work particularly well over the long run. As Asian economies expanded by leaps and bounds, Latin American economies stalled.

Hopefully, the current leaders pushing forward the Pacific Alliance and Mercosur have learned their lessons.

Still, the challenges ahead are not small. One hurdle is that the two blocs have very different tariff structures.

A second hurdle is likely to emerge from the domestic realities of the various member countries. For example, Colombia is part of negotiations for a new trade agreement with New Zealand.

On the other hand, around 500,000 families in Colombia depend on dairy farming for their livelihood, and the government wants to protect them. Each country has some kind of similar challenge to address.

Working through these issues will require dedication and commitment, the type of commitment that can see this group of often overlooked economies emerge as global leaders and the new champions of globalization.

The author, based in Bogota, Colombia, is a lawyer and a director at editorial consultancy Bahati Ltd. The views do not necessarily reflect those of China Daily.