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TradeInFocus   Our compilation of news to keep you in focus on key trade matters

Positioning Latin America in face of new global realities
Over the course of the meeting, ministers also reflected on the region's positioning in response to emerging international challenges and shifting global power relations, including the rise of nationalist parties in some parts of Europe and US President Trump's recent executive orders enforcing stringent duty collection at the border, commissioning a study into the US' trade deficits, and withdrawing the United States from the TPP.

"When tectonic plates move, you have two possibilities: you are either squeezed between them, or your opportunities open up," said Argentine Foreign Minister Susana Malcorra during the World Economic Forum on Latin America, which was also held last week. "We need to be fast on our feet to ensure we are not squeezed, and seize the opportunities," she added. Argentina will continue to be the standing Mercosur Pro Tempore chair for the first half of 2017.

In a separate statement, the Argentine official said that Trump's approach to trade with Mexico, which has been targeted in discussions for a potential review of the North American Free Trade Agreement, has meant that Mexico is now "choosing to strengthen its ties with the south," representing an opportunity for Argentina and the broader region for further integration.

At Friday's ministerial, representatives from both Mercosur and the Pacific Alliance pointed out the low volume of trade between the eight economies relative to trends in other regions, highlighting the imperative of harnessing this potential for growth. Intra-regional exports in Latin America account for 20 percent of total exports, as compared to the 60 percent of intra-regional exports in the EU and 50 percent in the East Asia-Pacific, according to World Bank data.

As a first step, a roadmap was outlined as a framework for potential convergence between the regional groupings. In the joint communique issued following the meeting, discussions were mandated between experts and officials to develop closer contact and share experiences in the areas of trade facilitation, cumulative rules of origin and the identification of possible regional value chains, trade promotion, and support for small and medium-sized enterprises.

A second meeting was also envisioned for technical exchanges on customs cooperation, following an earlier meeting between experts held in Buenos Aires last month. The results of the workshop process would ultimately be shared with the World Customs Organization. In addition, to advance progress in these areas and maximize cooperation between the blocs, the Pacific Alliance's High Level Group (HLG) and Mercosur's Common Market Group (CMG) were assigned to hold periodic meetings.
Bridges Weekly - 13 April 2017

Mercosur, Pacific Alliance Members Push for Deeper Economic Ties
On Friday 7 April, ministers from Mercosur and the Pacific Alliance convened in Buenos Aires for talks on developing closer ties between the two regional mechanisms, representing the second ministerial meeting since their joint integration effort was initiated in 2014. During the meeting, held at the seat of the Argentine Foreign Ministry, Palacio San Martin, officials agreed on a "roadmap" aimed at increasing cooperation and exchanging information between the two groupings. The Pacific Alliance, established in 2011, unites Chile, Colombia, Mexico, and Peru with the aim of advancing towards the free movement of labor, goods, and services between their economies. Doing so, they say, would help drive economic growth and development in their members and boost trade in the region.

Mercosur, founded two decades prior under the 1991 Treaty of Asuncion, brings together Brazil, Argentina, Uruguay, and Paraguay in a customs union comprising 70 percent of South America's population with 275 million inhabitants. Venezuela, while also a member, has been suspended over human rights concerns. Mercosur members have a combined GDP of US$3.32 trillion, which would make the bloc the fifth largest economy globally when considered together. Between the two of them, the blocs account for over 90 percent of the GDP and foreign direct investment of Latin America and the Caribbean.
Bridges Weekly - 13 April 2017

Roadmap - A new dynamic?
"The convergence between Mercosur and the Pacific Alliance could mean the birth of a new dynamic pole of the world economy," said Brazil's recently appointed Foreign Relations Minister, Aloysio Nunes, according to comments quoted in Rio Times. "We want to take advantage of the network of agreements that already unite us to make a leap of quality," he added. Mercosur has a free trade agreement in place with each of the Pacific Alliance countries individually. The agreement with Chile entered into force in 1996, followed by the Andean Community in 2001, Mexico in 2002, and Peru in 2005.

The plans for closer ties between the blocs are also giving hope to some officials to revitalize a struggling Mercosur. "Mercosur has been languishing. In recent years it has been one of the most closed and isolated blocks in the world. We have decided to change so that Mercosur is a powerful trading platform with a huge export potential for all international markets," Argentine Minister of Economic Development Francisco Cabrera stated in a press conference.

"It is another step that we will take in the rescue of the original purposes of Mercosur with a view to making the bloc a platform for the competitive insertion of our countries into the international economy," Aloysio Nunes said of the planned convergence. Argentina was granted observer status to the Pacific Alliance in June, joining fellow Mercosur members Uruguay and Paraguay, already observers to the group.

Meanwhile, Chile, Colombia, and Peru are all associate members of Mercosur. Chile currently holds the rotating presidency of the Pacific Alliance, and recently held a summit on regional integration which brought together Trans-Pacific Partnership (TPP) signatories and Pacific Alliance members, as well as China and South Korea.
Bridges Weekly - 13 April 2017

What's Next For America's Trade Policy With China
If there is one issue on which Washington across the entire political spectrum agree on, it is that the US needs to fix its trade and investments issues with China. US concerns include theft of trade secrets, counterfeiting, inadequate protection of intellectual property, online piracy, industrial policies that promote domestic goods at the expense of US products, subsidies, discriminatory product standards, the dumping of excess capacity, and restricted access for American services, according to a report that the US Trade Representative released last month, which included a 20-page chapter detailing America's trade problems with China.

The report is not surprising, since China's industrial policy measures and plans adversely affect American companies and workers now and will do so in the future, especially for industries China considers strategic, especially in information technology, but also including energy efficient and environmental technologies, biotechnology, high-end equipment manufacturing, new materials, and non-traditional energy vehicles. Anyone interested in America's trade relations with China should also read the lengthy 15th annual USTR report on China's Compliance with the rules of the WTO. It notes that the US has brought 20 WTO cases against China - more than double the cases brought against any other WTO member country. Given the litany of well-documented complaints, it was no surprise that President Trump tweeted a stern message last month before meeting China's, Xi Jinping, at Mar-A-Lago on last week. Although there was no substantive outcome announced from the meeting, both leaders were very positive about it, with Trump saying that "tremendous progress" has been made.

China and the US are expected to engage in a series of speeded-up talks on trade over the next 100 days aimed at reducing the US trade deficit with China. It is unclear what those talks will address, but constructive engagement holds at least some potential for progress on issues of concern. The first thing US negotiators must do is set priorities for the bilateral talks. The Chinese government has announced numerous measures in pursuit of its industrial policy objectives. Years of bilateral discussions have yielded only partial results regarding the problems that its policies create for US trade. Specific goals need to be set during the 100-day process, with clear paths forward for follow-up. There may be very few quick fixes. The only way that the United States can succeed in this effort is to be well-informed about the policies and measures it wants to see changed and to engage in an unflagging effort to obtain those changes.

Second, the US has to find a way to remain relevant in Asia. China is very active in financing infrastructure in the region through its Asian Infrastructure Investment Bank (AIIB); it is extending its economic and cultural influence through its multifaceted One Belt One Road initiative, a conceptual framework for reaching out from China over land and water to build infrastructure and strengthen trading relationships; and is seeking trade advantages through its leadership in a 16-nation negotiation for a free trade area, the Regional Comprehensive Economic Partnership (RCEP). The US has no apparent economic strategy of its own for Asia.

The US and 11 other countries had reached a consensus in the Trans-Pacific Partnership (TPP) that included updated rules designed to cover the region's trade and investment, but that is now gone. With US withdrawal from TPP, the rules for trade in Asia are likely to be set instead by China, the dominant economic partner in the region. Despite Chinese Premier Xi Jinping?s liberal trade sentiments expressed at Davos earlier this year, China?s current policies and measures are all too often far from being free-market oriented.

The Trump Administration needs to consider how it can re-engage with its former TPP partners, and other nations that had expressed an interest in joining TPP, to offer an alternative vision that is market-based. The means has to be found to have American economic leadership restored in the region.
What should not be done is for the US to turn a blind eye to trade-distorting practices in order to induce China to act as a responsible stakeholder on security and foreign policy issues. This is a current issue because of the President's tweet this week:
These two issues should not be linked. China should be motivated to rein in Pyongyang to serve its own security needs. Trading off US commercial interests makes no sense. If the US has competitive goods and services, they should be welcomed by China, and not sacrificed to get China?s cooperation with respect to North Korea. Nor should the US accept without complaint products created through misdirected industrial policies shipped to the United States in quantities that cause injury to US industries and resulting in substantial loss of US jobs.

No one can doubt that US national security is at risk with North Korea continuing its path to develop longer-range missiles that can reach the United States, as well as our allies, with nuclear warheads. But this country also has a vital national interest in maintaining a strong industrial base. This is essential to serve America?s national security now and in the future. Having the shape of the US economy determined by others? industrial policies is not acceptable.
Fortune - 13 April 2017

Port of Oakland Exec Says Shipping Line Changes a Good Thing
The Port of Oakland is eager for changes in the way container shipping lines operate. Maritime Director John Driscoll said in an interview today that newly formed ocean carrier alliances will benefit this Port. "We'll see larger vessels coming to the Port, which is a good thing,: he told employees in a podcast on the Port's website. "We'll get more container moves-per-vessel which increases the efficiency of operations."
Mr. Driscoll also said the Port will receive a new weekly vessel service as a result of carrier realignment. Taiwan-based Wan Hai Lines plans to launch a new route connecting Oakland and Asia, he said. That will bring the number of regularly scheduled vessel services calling Oakland to 29.
The changes result from an April 1 realignment in which 11 of the world's largest shipping lines formed three new alliances. Alliances let carriers pool ships on ocean routes to cut costs while expanding market reach. The carriers plan to deploy larger vessels in their alliances, carrying more containers to the US West Coast. That should enable them to reduce the number of voyages while maintaining cargo volume levels."When shipping lines can be more efficient " and healthier financially - we all benefit."
Mr. Driscoll said new alliance configurations should have little impact on Oakland operations. Some vessels will change which of Oakland's three international marine terminals they call, but the terminals are prepared, he said.
Port of Oakland - April 17, 2017:


tradeinfocus is a summary of news and events on the trade policy front for clients, trade & legislative colleagues, and professional friends of W.J. Byrnes & Co.