Innovative Regional Agreements Set to Reinvigorate Trade

Published
15 Mar 2018
2018
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Alem Tedeneke, Media Lead, Public Engagement, Tel.: +1 212 703 6642; Mobile: +1 646 204 9191; Email: ated@weforum.org

· Response to US protectionism should avoid destroying the fundamental values of trade policy, said Secretary of the Economy of Mexico

· New, modern regional trade deals will help contain protectionist trends

· More information about the meeting: http://wef.ch/la18

São Paulo, Brazil, 15 March 2018 – Risks to global trade may be overcome as several innovative regional trade agreements are gaining momentum. The current protectionist threat posed by US tariffs on steel and aluminium should lead the international community to “respond in a way that will not destroy the development of trade,” said Ildefonso Guajardo Villarreal, Secretary of the Economy of Mexico.

“I remain very optimistic we are moving forward. There are a few misconceptions about trade, like the one that says that trade deficits are bad. But I’m optimistic we can address these misconceptions,” said Ricardo Meléndez-Ortiz, Chief Executive at the International Centre for Trade and Sustainable Development (ICTSD), Switzerland, in a reference to regional trade deals. “There is a surge in integration, which shows that there is an appetite to move forward,” he added.

Mexico is exempted from US sanctions, but Guajardo said the trend towards protectionism has to be contained. “There is a new vision coming out of Washington. The world has to be realistic and take them seriously. They have a new concept of fair trade that implies rebalancing trade. And we have to see how we can respond to that in a way that will not destroy the development of trade, and how we can help to have a new balance in this context without destroying the fundamental values of trade policies.”

Regarding the steel issue, Guajardo said that tariffs should be targeted towards specific countries that are responsible for overcapacity. “Indiscriminate shooting is not a solution because you have implications around the world,” he said.

However, not everything is lost. “It is a very strange period of the economy with a mix of nationalism and mercantilism on one side and, on the other, we have a series of new trade agreements that have a progressive and bullish agenda,” said Meléndez-Ortiz. Those include the recently signed Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) among the 11 countries of the Pacific Rim, and a pending trade deal between the European Union and Canada, as well as between the EU and Japan.

“All these new agreements include chapters on sustainable issues,” Meléndez-Ortiz said. The NAFTA agreement, meanwhile, is still being renegotiated. A presidential election is due to take place in Mexico in July, but Guajardo said the negotiating team will remain in place. Nevertheless, trade gains within the Pacific Alliance have so far been limited, according to Fernando Zavala, President, Consejo Privado de Competitividad, Peru. “Customs are still a barrier and there are still a lot of regulatory issues to be solved,” he said.

Businesspeople have reported an improvement in business conditions in the region. “We have been moving goods across borders. The public and the private sectors have been working to facilitate trade. Things are getting better,” said Brian Newman, Executive Vice-President, Finance and Operations, Latin America, PepsiCo, USA.

“In general things are getting better. We have had opportunities to speed up and streamline processes,” agreed Gilberto Caldart, President, Latin America and Caribbean (LAC), Mastercard, USA.

The World Economic Forum on Latin America is taking place in São Paulo on 13-15 March. The meeting, which ends today, convened more than 700 regional and global leaders under the theme, Latin America at a Turning Point: Shaping the New Narrative.

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All opinions expressed are those of the author. The World Economic Forum Blog is an independent and neutral platform dedicated to generating debate around the key topics that shape global, regional and industry agendas.