Pacific Arc Plan: Innovative but Challenging

(International Relations and Security Network, 24/09/2007)


Peruvian President Alan Garcia has presented a new idea for regional trade integration in Latin America. Seeking to unite Latin American members of the Asia-Pacific Economic Cooperation Group (APEC), Garcia is advocating the idea of a "Pacific Arc" to promote Latin American trade with countries across the Pacific.


Peru - along with Chile, Canada, Colombia, Panama and Mexico - would organize a "modern social model" for free trade, Garcia says, to promote economic growth across the region. But critics have already denounced Garcia's plan as lacking weight and consensus, and many await an upcoming meeting in Mexico to critique what could be the most innovative plan for trade and growth the Americas has seen in recent history.


The greatest worry, perhaps, is that Garcia's leadership will not give the plan the level of support and international lobbying necessary to bring to life such a massive effort.


Representatives from the Pacific Arc countries are due to meet in Mexico in early 2008. Garcia, in a recent interview with Peru's El Comercio daily, said the bloc was not seeking to recreate the failed Free Trade Agreement of the Americas (FTAA) or the Bolivian Alternative for the Americas (ABLA). Instead, he said, the focus would be on the future.


Garcia claims that China will challenge the US as the world's largest economy by 2030. He believes Peru should position itself to take advantage of that growth by creating closer ties between his Latino counterparts in the APEC and their trade partners across the Pacific.


Chile has the most experienced free trade agreement negotiation team. With free trade agreements already in place with China, South Korea and Japan, Chile's inclusion in the Pacific Arc block is essential. To that end, Garcia met with Chilean President Michelle Bachelet during the recent APEC summit in Sydney, Australia. Talk of promoting closer ties between the historical rivals characterized the 50-minute meeting. So far, Bachelet, it seems, will support Garcia's new idea.


The Peruvian president also met with Chinese Prime Minster Hu Jintao to discuss the initiation of a free trade agreement between the two countries. Garcia left the meeting claiming the two countries would sign such an agreement by the next APEC summit in Peru in November 2008.


By that time, Peru should have also signed its long overdue free trade agreement with the US, where reaction to his Pacific Arc idea has been muted. However, it is unlikely that Garcia's initiative will interfere with his country's trade initiatives with the US. Washington is more than aware that such an agreement brings one more South American country into its camp - an important consideration in a region where there is a clear alternative.


By promoting a new idea for regional cooperation and trade, Garcia has presented a third option - outside of ALBA or ACLA - that is rooted in the safe bet of economic growth among Pacific countries. This fresh approach to trade in the region is perhaps the plan's strongest point.


But forthcoming support from his counterparts in other countries is questionable. Colombia - neither an APEC member nor in a solid position for a free trade agreement with the US - will perhaps be the last country to take up Garcia's initiative. Canada, like Panama, is likely waiting to judge Garcia's proposal from the tone and outcome of the upcoming meeting.


Mexican President Felipe Calderon has managed some momentum on the political front, but his complicated battle for the future of Mexican national security may overshadow any efforts to promote Mexico as a trading partner with Pacific countries. Many in Mexico see China as a principle source of competition, especially in the north, where Mexican maquiladoras - factories that import components duty-free and assemble wares for export - have felt the impact of cheaper Chinese labor.


Other observers point out overarching border disputes between Peru and Chile, and how such grievances may stand in the way of future cooperation. Both Bachelet and Garcia appear determined to look past such minor stumbling blocks, but members of Congress and the military in both countries may not.


Like most initiatives for regional integration, Garcia's Pacific Arc proposal is a mixed bag of hope, challenge and great promise. It may become another hollowed-out speech for a voting public wary of political promises, as the ACLA so far has turned out to be.


The more Garcia preaches the Pacific Arc, the more his political life will be tied to its success or failure. Fortunately for him, such grandiose plans take longer than the term of one president to meet success or failure.


As a president with an unpopular history and a questionable future, Garcia is not well-placed for the demanding leadership role. Perhaps strong partners or a new leader will emerge after the meeting in Mexico; if not, the Pacific Arc may never leave paper. It is, however, a good idea.