Thursday, March 28, 2013

Latin America Transpacific partnership: The road to prosperity

It has been long settled that free trade is necessary for growth, as a condition for improving the welfare of any society . These days , it seems to arise new calls for protectionism. The so called “currency war” looks like the first step, before going further on with restriction on trade to compensate any loses of competitiveness arising from exchange rate variations. Latin America learnt also long ago that inward looking kind of growth, leads the economy to dependency and inequality . Since the latest reforms applied in the nineties, and those one later on, trade has been quite relevant for Latin American economies. Between 2009-2011, total trade (exports + imports) grew by 54% . However, intraregional trade is somewhat behind the trend. Between 2011-2010 the intraregional trade share was barely 19,8%, with Mexico and Chile as the countries with the higher share among all Latin American economies, with 30,1% and 26,6% respectively. It follows that there is space for additional intraregional trade and investment growth. The Trans- pacific partnership comes out to reinforced the trend focused in what it is considered the trade theater of this century : the pacific ocean. Since 2010, there has been negotiations to shape a high standard agreement to deal with the complex issues of trade (such as property rights ), within the new global scenario which has lifted up the status of Latin America ,to become a global partner for trade and investment. Originally stated in 2005 by a few countries, aimed at liberalizing trade within the Asia- Pacific region, is currently moving to deeper commitments. Just a few days ago Mexico, Chile Colombia (in process to become a TPP member)and Peru, set a framework to liberalize 90% of their trade flows. The significance of improving intraregional trade flows ,goes even beyond its shot run impact on export and import volumes . Because the higher mobility, it also support better allocation of resources within intraregional areas, such that it increases specialization, innovation , infrastructure investment all of which create competitive edge and endogenous sources of growth .