Trade and investment in Latin America and Asia-Pacific: the link with APEC

Although trade and investment between LAC and the Asia-Pacific region have recovered since the Asian crisis +
and are continuing to expand, thanks especially to the upsurge in trade flows with China, biregional economic links generally remain weak and show little diversification.

For most of the countries in Latin America and the Caribbean, the Asia-Pacific region is still a largely unexploited market despite its impressive record in areas such as growth, international trade, foreign direct investment (FDI), technology upgrading and innovation capacities, as well as its continuously expanding foreign reserves.

The present dynamic aggregate demand of the countries of the Asia-Pacific region, especially China, offers Latin America and the Caribbean unprecedented production and export opportunities, both in commodities and in manufactures and services.

The Latin American and Caribbean region’s authorities should thus redouble their efforts to identify and capitalize on such new opportunities to enhance their countries’ potential complementarities with the Asia-Pacific region.

A number of important events have been organized in recent years to address the nature and scope of cooperation between the two regions. However, these initiatives have stopped short of institutionalizing high-level political talks or implementing plans and programmes aimed at strengthening economic, political and cultural ties.

There is a lack of awareness about the importance of biregional trade and investment, and there have been few coordinated strategies between countries or regional groupings for seeking closer trade and investment links with the Asia-Pacifi c region.

Approaches to that region by Latin America and the Caribbean have thus far been sporadic and piecemeal, and have chiefly y been confined to the conclusion of bilateral free trade agreements.

Until recently, Asia-Pacific regional integration has centred around its burgeoning intraregional trade flows, which are being driven by the increasing production and trade complementarities of the different countries’ manufacturing sectors.

Intra-industry trade (i.e., cases where a country both imports and exports similar but not identical products) has expanded significantly as the specific advantages of production and marketing chains are exploited more effectively.

This de facto (market-led) integration process in the Asia-Pacific region is now being reinforced by de jure (government-led) integration, and strong production and trade relations are being complemented by free trade agreements of various types that aim to consolidate such links.

To take full advantage of Asian trade-cum-investment dynamics, Latin America and the Caribbean must, as a matter of urgency, reorient and realign its relations with the Asia-Pacific region in order to sustain its commodity exports while producing more value added and more technologically complex manufactures for that market.

The strategy in this regard should be to: (i) promote the Latin American and Caribbean region’s participation in Asian supply chains with a view to boosting the value added and technology/knowledge content of its exports (including its exports of resource-based products; and (ii) forge closer trade relations by such means as joint export promotion campaigns, trade alliances among enterprises in the two regions and free trade agreements in order to address market-access problems.

Latin American and Caribbean companies should Endeavour to build ties with successful Asia-Pacific firms and to form part of the supply chains for their production and distribution units, including those of the natural-resource-based manufactures that are currently being exported to the Asia-Pacific region.

The call for greater biregional business alliances also applies to Asia-Pacific countries, which are global players in the market for technology-intensive goods and labour-intensive sectors such as footwear, textiles and apparel, and some segments of electronics. In these sectors, Asia-Pacific competes directly with North American, European and Latin American firms in the Latin American and Caribbean market.

The strategic position of the Asia-Pacific region in relation to other suppliers suggests that, in order to secure an even larger share of the Latin American and Caribbean market, these countries need to strengthen their links with Latin American and Caribbean economies by building up alliances and promoting various forms of mutually beneficial business cooperation.

TABLE OF CONTENTS

APEC in the world economy .– Latin America and the Caribbean and the Asia-Pacific region in the world economy .– Trade and investment links between the Latin American and Caribbean and Asia-Pacific region .– De facto (market led) integration between Latin American and the Caribbean and Asia-Pacific region .– De jure (government led) integration in and between the two regions.

https://www.cepal.org/en/publications/2916-opportunities-trade-and-investment-between-latin-america-and-asia-pacific-link

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