I believe associate membership with the Pacific Alliance would make sense for Canada. For Canada, the Pacific Alliance is the right platform to advance our interests in Latin America. They are business-minded and embrace the rules-based democratic order.
Canadian investment in the Pacific Alliance is estimated to be in the ballpark of $40 billion. The economic health of a lot of Canadian firms, especially in resources and finance, is tied up in the economic well-being of the alliance.
The “Pacific pumas”, as they are sometimes called, have more than 221 million consumers, with a combined GDP that would make them the sixth biggest economy. The four countries are responsible for approximately 33% of Latin America's total gross domestic product, 50% of Latin American exports, and 40% of the total foreign direct investment capitalized in the region.
Their goal, as you have probably been discussing, is the free movement of people, goods, and services. They are negotiating their stock markets, and they even share embassies in some countries.
My belief is that the Pacific Alliance is a good match for Canada, especially as other key Pacific partners—Australia, New Zealand, Singapore, and now South Korea—are also looking at associate membership.
Since the days of the coureurs des bois and the Hudson's Bay Company, Canada has been a trading nation. According to Global Affairs, our trade-to-GDP ratio is around 70%, one of the highest in the world. During the past century, we have become a nation of traders. One in five jobs depends on exports. The progress and prosperity enjoyed by Canada is thanks to trade liberalization. My view is that participation in the Pacific Alliance should be part of a broader strategy, which I think we're undertaking, that will increase opportunities for our goods, services, and particularly—interestingly enough, in the Pacific—for our pension funds.
Services today account for about 70% of the Canadian economy. We're good at trade and services, notably banking, insurance, and engineering. Think of Scotiabank, which is now one of Mexico's biggest banks and is of growing interest in Chile, Columbia, and Peru; or of Manulife in Asia; or of SNC-Lavalin or Brookfield in engineering and infrastructure projects around the world.
The trade explosion, of course, began with the Canada-U.S. FTA, and then the NAFTA. These deals opened up access to the U.S. and Mexican markets and gave us, I think, the confidence to compete internationally. We've had a slew of other agreements since then, including the Uruguay round, and we have more trade agreements in Latin American than in any other part of the world.
The recent negotiation of the Canada–Europe agreement, CETA, and now the FTA with the Pacific nations, the CPTPP, give us even more opportunities for sales and investment. However, you might ask, if we already have free trade agreements with Chile, Columbia, Mexico, and Peru, why do we need to take the next step of associate membership in the Pacific Alliance?
First, we must take our opportunities where they come. We must consider Pacific Alliance associate membership against a backdrop of “America first” protectionism with our biggest trading partner, and no foreseeable conclusion to the somewhat zombified WTO Doha round. With the Trump administration having removed the U.S. as the anchor of trade liberalization, middle power groupings such as the Pacific Alliance need to pick up the slack to sustain the rules-based order that serves our interests.
Second, for Canada, the Pacific Alliance would consolidate our position as a first mover within the best trade agreement in the Americas, just as we've done within the Pacific through CPTPP, and the transatlantic through CETA. It's always better to be a driver setting the course in the front seat rather than a late passenger along for the ride at the back of the bus.
Canada would become a leader within the Pacific Alliance by virtue of being the biggest economy in what would constitute the most liberalized caucus of trade nations in the world. While it's about trade, it's also about building deeper cooperation through regulatory integration and addressing emerging issues like the digital economy, the environment, and women's empowerment.
Canada can benefit, I think, from linking to the best parts of the Pacific Alliance. The “accumulation of origin” is also an argument for associate membership, weaving the four FTAs we have with those four countries into a somewhat seamless web, which will make it easier for us to do business.
The Pacific Alliance's innovative approach means working on one-stop shop initiatives for foreigners looking to do business in the Alliance and implementing flexible rules of origin so that we can integrate into value chains.
Third, deeper bridges with the alliance will bolster the deep linkages we have developed in the region. What better place to advance the progressive trade agenda than with these progressive democracies? We've already begun. Last year the Canada-Chile FTA was revised to include gender rights.
Fourth, associate membership will give us more place and standing in the Americas. The Pacific Alliance countries share values and an outlook on the world similar to Canada's. They are liberal democracies with open economies. Given the periodic illiberal governance in parts of the hemisphere—think of Venezuela—the stable and open economies of the Pacific Alliance stand in stark contrast.
Canada should support efforts in integration within the region and the best way to do it is within the alliance. Ties of history and migration have given us strong links across Asia, the Pacific, and the Atlantic, but our ties with south of the Rio Grande, in fact, are relatively recent.
Our relationship with Mexico, our third-largest trading partner, increasingly solidifies with significant Canadian investments in mining, banking, and manufacturing. Over two million Canadians travel there each year. But the investment in tourism flow is mostly one way. We need to do more to bring Mexico and our other Latin American partners to Canada to study, work, invest.
The government's consultations on membership in the Pacific Alliance need to look at potential problems. For example—
