(14 June 2013) ECLAC proposed a series of recommendations for strengthening Latin America-East Asia cooperation and taking advantage of the growing South-South trade potential, in one of the Commission's most recent studies presented at a ministerial meeting that ended on Friday in Indonesia.
The 6th Ministerial Meeting of the Forum for East Asia and Latin American Cooperation (FEALAC), which took place in Bali on 13 and 14 June, brought together government authorities from 36 Latin American and East Asian countries in a region-to-region dialogue.
According to a speech by Antonio Prado, Deputy Executive Secretary of the Economic Commission for Latin America and the Caribbean (ECLAC), "The growing prominence of developing countries in the world economy shows not only their economic buoyancy but also stronger links thanks to better trade, investment and cooperation".
Prado went on to say "Both regions should adjust their strategies and policies to make use of the growing South-South trade potential".
In the document Strengthening biregional cooperation between Latin America and Asia-Pacific: the role of FEALAC, drafted by the ECLAC Division for International Trade and Integration as instructed by the Government of Korea, the Commission states that East Asian economies have remained buoyant while industrialized countries continue to post low levels of growth.
This region is expected to represent 60% of world growth between 2012 and 2022, while Latin America's share could overtake that of the Middle East, Africa or even Europe.
Asia is currently an untapped market for many Latin American countries. Chile and Peru have free trade agreements with China, Japan and South Korea, while Mexico has only signed one with Japan. The same three countries are taking part in negotiations through the Trans-Pacific Partnership Agreement (TPP), whereas MERCOSUR only has a potential agreement with India (and is not negotiating with any other Asian partner).
However, concluding free trade agreements with Asia is not the only way to strengthen ties, nor does it guarantee that they will be used by economic agents. Utilization rates of such agreements are still low when compared with those signed by the United States. For example, the North American Free Trade Agreement (NAFTA), which entered into force 17 years ago, still boasts a stable utilization rate of around 50% every year. The reasons for the low impact of agreements with Asia are the lack of information on procedures, low export volumes and high costs.
ECLAC suggests regular exchanges of information on market opportunities and access conditions, as well as a public policy review in areas such as trade facilitation, internationalization of small and medium-sized enterprises and the development of production networks and value chains.
Business participation is essential to strengthening ties between the two regions. There is therefore a proposal to make a permanent institution of the FEALAC Business Summit, which was first held in Colombia in 2012, to provide a space for discussion and generate business opportunities for the two regions.
The ECLAC document also states that innovation and competitiveness can only be achieved by training human resources, and this requires using long-term strategies and plans to strengthen the links between the education system and the production system. In this field, Latin America has much to learn from East Asian experiences in terms of adopting new technologies, distance learning and so on.
Another limitation of the Latin American economy is its infrastructure, which has serious shortcomings in terms of quality and quantity. According to a recent ECLAC study, the region would have to invest around 5.2% of its GDP annually just to meet expected levels of economic infrastructure demand during the period 2006-2020. If the target were to match the per capita infrastructure stock of a group of East Asian economies in 2005, the required annual spending in infrastructure would increase to 7.9% of GDP over the same period (2006-2020).
ECLAC thus proposes the creation of biregional working groups to analyse the experiences of public-private partnerships for infrastructure projects, in order to learn lessons and present new initiatives.
In the face of sustainable development challenges, East Asia has good recent experience that can be used to support the efforts of Latin American countries to move towards a green economy. Business and technology partnerships, as well as closer cooperation between the governments of both continents, will be instrumental in achieving this.
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