Latin America is being left out of the World to Come By Nicolás Albertoni and Jorge HeineRead Now
Perhaps it went unnoticed by many, but this month Asia broke into the commercial world: the Regional Comprehensive Economic Association (RCEP) was signed, a trading bloc formed by China, Japan, South Korea, Australia, New Zealand, and all Southeast Asian countries. It is a milestone. Together, they are a market of 2.2 billion people (30 percent of the world's population) and a GDP of just over $ 26 trillion (about 30 percent of world output).
In the midst of the coronavirus pandemic, while tensions between the United States and China rise, while the European Union still has not managed to resolve Brexit, the message sent by the RCEP is strong and clear: in Asia, no time is wasted. It is a message that Latin America seems neither to hear nor to heed.
In Asia they understand, for example, that the protectionism that shakes the North Atlantic countries is not the best way to go. They have understood that geopolitical differences, such as those between China and Japan and South Korea, or between Australia and China itself, should not stand in the way of more open trade flows.
What does the RCEP mean for Latin America? On the one hand, it indicates that Asia, the main market for a good part of the South American countries, will continue to grow in importance and make up an ever greater part of the world economy. On the other hand, as Latin America is not part of the agreement, it reflects the marginalization of the region from these plurilateral treaties that arise from the stalemate in the Doha Round of the World Trade Organization (WTO).
The sad reality is that the region's fragmentation and its inability for collective action at the multilateral level condemns it to an increasingly secondary role in the global political economy, with dire consequences for its development. The contrast to the Association of Southeast Asian Nations (ASEAN) - promoters of the RCEP - couldn't be greater.
In addition to the RCEP, these agreements include the Trans-Pacific Economic Cooperation Agreement (CPTPP), made up of, among others, Japan, Australia, New Zealand, Chile, Peru and Mexico; the attempt for a Transatlantic Agreement on Trade and Investment (TTIP) between the United States and the European Union; the Agreement on Trade in Services (ACS) —which accounts for 70 percent of world trade in the sector— and others. These treaties tell us that countries committed to trade liberalization seek “safe havens of consensus” in the face of stagnation in multilateral negotiations.
The signing of these international "mega-treaties" could have a strong impact on the world economy. Not only because of the dimensions of the two recent mega-treaties (the RCEP and the CPTPP), but also because the RCEP, for example, covers areas as diverse as the regulation of emissions, agricultural subsidies, intellectual property, communications and services. And emerging economies like those of Latin America should see how to adapt to the new regulations that this type of negotiations can promote.
On the other hand, the US elections, and the possibility of seeing a more proactive United States in reestablishing its commercial ties with the world, were key for the RCEP members (China especially) to continue the negotiations and sign a pact that will greatly facilitate the trade between their countries. This makes it possible that the United States, led by Biden, does not want to be left out of the mega-treaties and reactivates its ties with the CPTPP.
The bad news is that this will make up a bipolar commercial world made up of two large trading blocs in which much of Latin America does not participate.
Specifically in the RCEP, Latin America has no art or part (although Chile took steps to join it at the time), and it is largely emblematic of the isolation that the region suffers from the great processes of change that occur in the world from today. The international insertion of the region, very distant from the global value chains on which production is currently based, contrasts with the situation of the countries of Southeast Asia, which have known how to link themselves to these value chains, something that they strengthen with this treaty.
The ideal would be to advance these issues of trade liberalization and other items in universal multilateral negotiations. However, we live in an imperfect world, with suboptimal solutions. The central point for Latin America is to understand that the countries that make up these mega-treaties will continue to advance to promote greater diversification of their markets. And the countries of the region are increasingly removed from those talks. It is an unfavorable scenario: from these mega-treaties the rules of the 21st century trade are being written.
Those who are not part of the large agreements will be at a disadvantage, not only commercially, but also for not having participated in the design of new regulations that will emerge. It is possible that, in a few years, these countries that today advance in the most ambitious treaties will say: “We have already concluded the new rules for our trade. Take them or leave them ”.
So, what to do?
It is crucial that Latin American countries that are not party to these agreements react and join them. It is there that the world to come is being forged.
It would be best for these discussions to take place within the WTO, but today it is increasingly difficult to reach a global consensus on these matters. For Latin American countries, this means not just associating themselves with these agreements, but also taking the initiative for the creation of new ones.
If ASEAN has done it, there is no reason why Latin America shouldn´t be able to do so. The great powers do not have a monopoly on this matter. The time to act is now.
November 30, 2020 at 05:00 ET
Nicolás Albertoni is professor of International Relations at the Catholic University of Uruguay.
Jorge Heine is Professor of International Relations at the Pardee School of Global Studies at Boston University. He was Chile's ambassador to China from 2014 to 2017.
12/12/2020 03:42:17 am
Very timely Blog! I really would like to see CARICOM get its act together in terms of intra-regional trade and inter-regional trade. The infra-structure works being pursued, hopefully aggressively, to link Guyana by a bridge over the Corentyne River to Suriname, French Guiana and Amapa, and the upgrading of the road to link to Brazil providing access to a market of 6m, will put Guyana in a strategic position as a hub for intra-regional trade (CARICOM) and inter-regional trade
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Edward and Auriol Greene Directors, GOFAD.