Pacific Alliance talks could open up trade in Latin America

Latin America is full of opportunities for New Zealand exporters, Trade Minister Todd McClay says. Photo: Lynn Grieveson

The launch of trade negotiations with several Latin American countries could open up the region for Kiwi exporters and investors, Trade Minister Todd McClay says.

McClay is hopeful the discussions with members of the Pacific Alliance - Mexico, Peru, Chile and Colombia - could provide leverage for New Zealand with others in the region.

The four countries boast more than 221 million people and a combined GDP of US$3.85 trillion - equivalent to the world’s sixth largest economy.

The announcement of negotiations came at the Pacific Alliance Summit in Cali, where New Zealand was also made an associate member.

Speaking to Newsroom from Colombia, McClay said the launch of negotiations was an important step in improving access to the area.

“It’s significant, I wouldn’t say others [trade deals] are more important but what I think we need to recognise is this will be our first trade deal in the South American continent, and that in itself is significant.”

McClay said there were significant opportunities on offer in many of the countries, with a number of their economies having been “closed off to the world” for some time.

“If you take Colombia where we have very modest levels of trade, less than $50 million worth of two-way trade, that’s because Colombia has had 50 years of civil war - well they’ve reached peace so they now want to trade with the rest of the world.

“I see significant opportunities for New Zealand companies here, in the agricultural space, both from investment through production and selling them through, and in return other goods and services from Colombia we may well have interest in in New Zealand - we already buy quite a lot of our coffee here.”

He pointed to a recent trade deal with Chile as a sign of the potential growth for exports in the South American countries.

“We did a trade deal with them a few years ago - since then our exports to them have doubled and theirs to us have tripled, we’ve seen New Zealand invest significantly in their dairy industry which has transformed it both for domestic consumption and also exports, so there are some quite fantastic opportunities here.”

With Mexico in particular looking beyond the United States for trade opportunities as President Donald Trump’s protectionist rhetoric continues, McClay said New Zealand’s “clarion call” for the benefits of free trade was one factor in the Pacific Alliance being keen to enter negotiations.

“We’ve been traveling quite extensively talking up the opportunities that free trade has presented to New Zealand, I think you’re just seeing the culmination of a couple of years of very hard work.”

Signing a high-quality agreement with New Zealand could allow the Pacific Alliance to get some deals under the belt “before they launch themselves fully into Asia”, McClay said.

The first negotiation round will take place in Peru in September, allowing both sides to set the level of ambition for the deal with a goal of signing it within twelve months.

Mercosur

The Government is hopeful that the Pacific Alliance talks could have a knock-on effect with other trade discussions in the region, including those with Mercosur - made up of Argentina, Brazil, Paraguay and Uruguay, with a combined GDP of more than US$2.4 trillion and a total population of 260 million.

While the trading bloc has traditionally been more protectionist than expansionist, McClay said discussions with Argentina and Brazil had led him to believe they were serious about a change of approach.

“My message to them is we’re open to negotiation but both sides must be serious, so for the Argentinian trade minister this week to say to me they too would like to launch by the end of the year, I think those are very positive signs.”

McClay said he was hopeful that negotiations with Mercosur could be launched before the end of the year, although “in trade terms you can’t count anything until it happens”.