My main argument is that Canada is confronting a very complicated and rapidly shifting situation in the Americas, and that it has to be very careful and strategic about its policy choices. We have limited resources for engagement in the region, and we face a situation in which I believe we could easily be marginalized.
In evaluating prospects for closer ties with the Pacific Alliance, I think it's extremely important for the committee to have an understanding of broader trends in the region.
The Americas strategy seeks to promote Canada's involvement in this dynamic region. I think there are a number of challenges that Canada faces, one of which is the decline of the role of the United States in the region, not just because of the end of the cold war but because various recent administrations in the United States have taken less of an interest in the Latin American region. Also, the rise of China of course is always on our mind these days.
Canada itself increased its role dramatically in Latin America when it signed the NAFTA that included Mexico. Subsequently, however, and I'm going to expand on this point later, attempts to deepen integration in North America in the form of the security and prosperity partnership of North America have failed, partly because Canada felt that the inclusion of Mexico would sort of drag down progress toward harmonization of regulations and standards. Of course, since then Canada and the United States have been advancing toward a bilateral security perimeter.
Another major shift in the region has been the election, as you know, of new left governments in a majority of the countries, notably Brazil, Argentina, Uruguay, Venezuela, Bolivia, Ecuador, Nicaragua, and El Salvador. I would argue that this has important implications for understanding what's going on in terms of regionalism.
We have also seen, to some extent, some moves toward greater unity in the Latin American states, and at the same time the marginalization of Canada and the United States with the formation of a group being called UNASUR, the union of South American nations, and also CELAC, the community of Latin American and Caribbean states.
The increasing divide between Canada and the U.S. on the one hand and Latin American states on the other was perhaps first sparked by the failure of the FTAA, the Free Trade Area of the Americas. The FTAA project was designed to promote a free trade agreement between all states of the region, except Cuba, based on WTO-plus standards, and was promoted heavily by the United States and Canada.
The initiative failed, however, because of opposition from Brazil and other Mercosur countries that were rejecting the so-called Washington consensus policies that the FTAA was seen to embody. There was also strong civil society opposition. Since the failure of the FTAA, Brazil has used its regional alliances to promote what has been called a ring of encirclement around U.S. influence in the region.
I just want to mention a little bit more about what we call post-neo-liberalism, or the nature of these new left regimes. Some people, like Jorge Castaneda, for example, have sort of simplistically divided them between bad new left governments and good new left governments, the bad left being, of course, Chavez, Morales, and maybe Correa, and the good left being governments like Lula's in Brazil, and Bachelet's in Chile. I would argue that we need a much more nuanced analysis of what's really going on in those governments because they do in fact share a lot of characteristics, including respect for democracy, commitment to sound macroeconomic policies, a stronger role for state intervention, and strong social programs. They also mostly reject old-style protectionist policies, and seek external trade linkages, but they are looking for a different type of regional integration.
On the next slide, I put up a categorization of these new left governments as made by two scholars, Levitsky and Roberts. It just gives you a sense that there's something more going on there than just bad left and good left. It's more complicated than that and it has to do with the history of each country.
Politically, the most recent OAS summit illustrated the growing divide within the region, as Latin American and Caribbean states seem to reject, to some extent, U.S. and Canadian roles and their positions on such issues as drug policy and the membership of Cuba. We do see some growing unity among Latin American states in organizations such as CELAC. I think this is a warning sign that Canada has to tread carefully when we go into the region, because we could become further marginalized. We also see Mexico seeming to return to the region, because it's a member of CELAC.
We also see two kinds of competing models of regionalism, one led by Brazil and to some extent Venezuela, and the other the Pacific Alliance, made up of governments that remain closer to the U.S. economically. On the slide, those are the countries in red on the map.
Economically, the scene is extremely complex, with the proliferation of bilateral and regional alliances both inside and outside the region. I'll show a couple of pictures of what's going on. The picture on the screen shows the situation in 1994, where there were five fairly self-contained regional groupings. The next slide shows the situation in 2008, where we see what Bhagwati calls the spaghetti bowl situation with innumerable regional and bilateral trade agreements involving actors both inside and outside the region. It's extremely complicated.
That brings me to the Pacific Alliance. How do we evaluate this recent regional formation?
First, it seems to me that Canada already has FTAs with all four member states and we do not stand to gain very much in purely economic terms. We also have investment agreements with them.
Second, the Pacific Alliance is not just a free trade area, the first stage of regional integration, but aspires to and already has moved to a deeper and more challenging form of integration, perhaps more similar to the EU, more like a common market. The goals of this group are free movement of goods, services, capital, and people. The member states are rapidly moving towards such goals as integration of stock markets, visa-free travel, harmonization of regulatory standards, security cooperation, and so on. If we were unable to achieve deeper forms of integration with Mexico in the SPP, my question is whether it is very likely we could do this in the Pacific Alliance, which adds three even more distant Latin American states in a grouping which I would guess virtually no Canadian has heard of.
Third, although members have described it as a pragmatic and non-ideological grouping, the Pacific Alliance clearly represents a political response to the rise of Brazil as a regional leader, an attempt of these states to balance against the other groups of Mercosur and ALBA. My question is whether this is a fight we really want to get involved in.
Finally, the Pacific Alliance also represents an attempt to position the member states vis-à-vis the Asia-Pacific to facilitate ties with it and perhaps to strengthen their position to enter into ASEAN or the TPP.
I won't say very much about the TPP, except to say that this is a very complicated and ambitious trade agenda based on very high trade and investment standards. They've been called platinum trade and investment standards, even above the gold standard of the FTAA, and very different types of countries are involved. I think it's quite likely we're going to see very long and slow negotiations and considerable civil society opposition, and it could descend into another FTAA type of experience.
To conclude, I want to raise a few cautionary notes regarding the prospect of Canadian membership in the Pacific Alliance. What would membership entail, especially in areas such as mobility of people, harmonization of standards, and stock markets? It's too soon to tell, given the lack of an accession clause. What would the members expect from Canada? Is it really very likely we'd get a different deal than the members already have with each other? I don't think so. If we couldn't achieve deeper integration in North America with Mexico, how would this be possible if we were to add in three even more distant Latin American states?
Perhaps more importantly, and this is probably my main point, how would membership in the Pacific Alliance affect our relationships with Brazil, the economic powerhouse in the region? Could we be foreclosing on options for closer ties with Brazil and Mercosur if we were to align ourselves so closely with their regional competitor?
Finally, and I don't want to expand on this point too much, Canada's role in the region is already increasingly controversial, given our growing identification with extractive industries, particularly mining. Would the deepening of ties with these four states result in even greater marginalization for Canada?
Thank you very much.