ASEAN, the Pacific Alliance and Mercosur: Moving Forward with Sub-Interregional Trade Cooperation

Interregional or cross-regional trade between geographically distant partners has grown in recent years, transcending intraregional trade, as countries that have exhausted their gains or potentials within regional boundaries seek to secure new or alternative markets.

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From that perspective, interregional trade is seen as a promising solution. One reference point is the Association of Southeast Asian Nations (ASEAN) and Latin America (LA) region-to-region partnership. Yet, interregional trade between distant partners, such as the ASEAN-LA, is often beset with high trade costs, which includes transport costs and other costs (information, compliance, and procedural costs).

To date, the most revealing point on the ASEAN-LA connection is that the estimated impact of the existing bilateral free trade agreements (FTAs) are found to not significantly matter for interregional exports for the following reasons. First, though many Asia-LA FTAs liberalize tariffs in a relatively fast manner, they contain temporary or permanent exclusions lists. For example, the Thailand-Peru FTA adopted a gradual approach to tariff liberalization, where they only committed 70% of total tariff lines to liberalization, excluding a wide range of goods, within the categories of agricultural products, fish products and durable goods. Second, many of the bilateral FTAs between the ASEAN Member States (AMS) and the LA countries do not include commitments that are substantive (such as market access commitments and harmonization of standards obligations). For example, it was reported that the coverage of substantive commitments for Vietnam-Chile FTA (2012) and Malaysia-Chile FTA (2012) is only 2.2% and 5.4% respectively, compared to 23.3% for SingaporePanama FTA (2006), 25.6% each for Singapore-Peru FTA (2009) and Singapore-Costa Rica FTA (2013). It can therefore be inferred that the current bilateral FTAs between ASEAN and LA, which are signed and in effect, may not significantly create the intended market access for trade integration.