EDITORIAL (November 22 2008): Trade and investment between Latin America and Asia remains an untapped field ready for exploiting by those with determination on either side of the Pacific, business and political chiefs say here. Asia's interest in more access to Latin America's bountiful natural resources -- metals, minerals, oil, as well as beef, soya and other crops -- for its expanding economies is fuelling the trans-Pacific relationship on view at this week's Asia Pacific Economic Co-operation (Apec) forum in the Peruvian capital.
China in particular is looking to snap up raw materials for its economy, which is still projected to grow at an impressive clip despite headwinds from the global downturn. "China wants to work with the South American and Caribbean countries through a partnership of total, balanced, mutually beneficial co-operation," Chinese President Hu Jintao told Peru's parliament on Thursday ahead of the Apec summit.
The day before, China and Peru announced negotiations on a bilateral free-trade agreement had been successfully completed. Earlier in the week, Hu was in Costa Rica for talks on another such agreement with that country, and to sign a series of co-operation accords. He also made a visit to long-time political ally Cuba, to which he donated 4.5 tons of humanitarian aid.
But China is not alone in seeking out opportunities in Latin America and nor is the trade all in one direction. South Korean President Lee Myung-Bak, who arrived in Lima on Thursday, added a Brazil leg to his South America trip to speak with that country's president, Luiz Inacio Lula da Silva, about bilateral trade and investment in natural resources and agriculture.
Japanese Prime Minister Taro Aso met Lula in Washington on the sidelines of the G20 summit to discuss similar issues. Indonesian President Susilo Bambang Yudhoyono, meanwhile, dropped in on Mexican counterpart Felipe Calderon to discuss co-operation between their two state oil companies.
For Latin America's rising economic star Brazil, exports to Asia amount to 16 billion dollars per year. Chile, in second place, signed a free trade accord with China two years ago mostly to sell its main resource, copper. It earns 13 billion dollars a year from trade with Asia. Mexico trails far behind, with four billion dollars in exports each year, reflecting its focus on the US market.
But Peruvian economist Jorge Gonzalez Izquierdo is guarded about how soon this budding relationship will grow into something more substantial. "Commercial relations between the two regions still remain in an embryonic stage," he said. Exchanges thus far show "very little diversification," he said, adding that: "The potential can be seen in the long term."
In all, Latin American exports represent only 2.7 percent of all exports to Asia, which buy just seven percent of Latin America's total exports. In the other direction, Asian goods coming to Latin America, mostly from China, account for 20 percent of the region's imports. Meanwhile, Australia and Peru on Thursday joined the United States in a budding tariff-busting plan that could form the centerpiece of a proposed Asia-Pacific free trade area gaining traction amid financial turmoil.
Trade ministers from Australia and Peru announced their membership in the "Trans-Pacific Strategic Economic Partnership" ahead of a summit of the Asia-Pacific Economic Co-operation (Apec) forum in Lima, Peru. The move came two months after the United States joined the group, previously confined to Singapore, New Zealand, Chile and Brunei, as the region tries to use trade as a tool to fuel economic growth at a time when countries are plunging into recession.
"There are now seven countries prepared to enter negotiations to try and sign a Trans-Pacific basis for moving forward on trade liberalisation," Australian Trade Minister Simon Crean told reporters. "There is commitment at many levels to pursue the path of trade liberalisation and the reason for that is even more important in the current climate because one of the most important drivers of economic activity is trade," he said.
More countries in the Apec group could join the partnership by March, when the first round of negotiations on freeing up investment and financial services among the seven is held in Singapore, Peruvian Trade Minister Mercedes Araoz said. Under the partnership, tariffs on all trade products would be eliminated within 12 years, with tariffs on 90 percent of trade in goods among the parties removed immediately, officials said.
Economies in the Apec group, which has a loose objective of achieving free trade and investment in the Pacific Rim by 2020, account for half of world trade and about 60 percent of production of goods and services. The Apec forum first proposed a plan to forge the regional free trade area stretching from Chile to China two years ago but it has gained greater attention recently as nations become desperate to pursue growth and global trade talks deadlock.
Sixty-one percent of nearly 500 people surveyed in governments, businesses, media, civil societies and academia in the region said a free trade area for the Asia-Pacific region should be negotiated as soon as possible. The free trade plan has now overtaken the longstanding effort to forge a global trade deal under the World Trade Organisation "as a priority area of discussion," said the Pacific Economic Co-operation Council, a Singapore-based regional think tank, which undertook the survey.
Apec economies have been considering various approaches to forge the free trade area, including the partnership used by the seven nations to remove trade barriers. "The Trans-Pacific partnership could form the basis for centrix circles, building out a Free Trade Area of the Asia Pacific," US Trade Representative Susan Schwab told reporters.
Another approach being considered was "marrying" the plethora of free trade arrangements already in place in the region into a mega FTA, she said. Aside from the United States, Australia, Singapore, Chile, New Zealand, Brunei and Peru, Apec consists of economies such as China, Russia, Japan, Canada and other key Southeast Asian economies.
Apec foreign and trade ministers, preparing for a weekend leaders' summit, said they had made "significant progress" this year in examining the prospects for the regional free trade area "through a range of practical and incremental steps." The plan to create a regional free trade area "should also help address the complexity created by the current array of free trade areas and regional trading arrangements in the region," they said in a joint statement.
