Alianza del Pacífico
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Pacific Alliance to approve tariff relief on 92% of goods: Santos

by Connor Paige

Colombia President Juan Manuel Santos affirmed on Monday that a principle point on inter-alliance tax relief, a tariff reduction on 92% of goods, will be signed by member countries during a Pacific Alliance summit next Monday in Cartagena claimed a Colombian news group.The president will take his turn as the Pro Tempore, or rotating host of the Pacific Alliance’s other member leaders: President Enrique Neña Nieto of Mexico, Sebastian Piñera of Chile and Ollanta Humala of Peru on Monday, February 10 in the historic city of Cartagena on the Caribbean coast.

MORE: Colombia to Host February’s Pacific Alliance Summit 

The measure to reduce tariffs on 92% of goods is a stepping stone to an eventual full 100% removal of tariffs between the nations of the Pacific Alliance according to President Santos.

The remaining 8% of goods that will not have tariff reductions are primarily agricultural goods.

Santos has ardently supported the Pacific Alliance since its’ inception in June of 2012.

Is the Pacific Alliance good for Colombia?

Actors within the Pacific Alliance declare that the agreement will support economic growth by allowing member countries a greater ease of access to exterior markets through utilizing economic channels already liberalized within member countries and the opportunity to create of more economic channels.

At this point, however, trade between Colombia and the other member countries is mostly overshadowed by Colombian trade to world markets outside the Pacific Alliance like the US and China.  According to DANE (National Administration Department of Statistics) from January to November 2013 Colombian exports to the other Pacific Alliance countries made up less than 7% of total exports.  DANE documents that during the same period last year Colombia imported less than 13% of its’ total imports from Pacific Alliance nations.

Within these relatively low total trade percentages is a large trade deficit with Mexico.  Again using the government statistics Colombia exports less than 1.8% of its total exports to Mexico while importing 9.4% of total imports from Mexico.  DANE statistics show this trade deficit at 4.18 billion USD.  A 92% tariff reduction could inversely affect the Colombian economy in regards to Mexican imports.  Colombia does, however, have small trade surpluses with Chile and Peru though these are significantly less than the deficit with Mexico.

Regional integration

The Pacific Alliance contends that it will foster the social and economic growth of individual actors in participating nations and the region as a whole through deeper integration and coordination which will allow products, capital investment, services and human capital to flow more freely between the member nations.  By increasing the fluidity of these economic factors the Pacific Alliance argues an easier path to other world markets will be facilitated.  The group places particular importance on increasing trade with the burgeoning Asian Pacific market.

The MILA (Integrated Market of Latin America) currently incorporates the stock markets of Colombia, Peru and Chile.  The MILA was initiated in 2011, prior to the signing of the Pacific Alliance but it stands to gain the stock market of Mexico as a result of the agreement, potentially making it the largest stock market of Latin America.

The Pacific Alliance has taken several tangible measures in regional integration since its’ commencement.  Travel restrictions were eased between member countries through the elimination of tourist visas.  Some participating nations have opened shared embassies around the world such as embassies shared between Colombia and Chile in Algeria and Morocco.  Colombia and Peru share embassies in Vietnam and Ghana.  The Pacific Alliance has also made commitments to student scholarships and healthcare coordination.

Sources