The New Strategic Environment of the Trans-Pacific - A US Perspective - R Evan Ellis.pdf

8/20/2019 The New Strategic Environment of the Trans-Pacific - A US Perspective - R Evan Ellis.pdf

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16 hours ago FEATURED | The New Strategic Environment of the Trans-Pacific : A U.S.Perspective by Dr. R. Evan Ellis

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This article is translated into English by the author which has been earlier published at Política Externa

[http://politicaexterna.com.br/] , a leading Brazilian Foreign Policy Journal in Portuguese Language.

By Dr. R. Evan Ellis

Introduction

In an April 2015 speech, U.S. Secretary of Defense Ashton Carter affirmed the significance of the trade regime that

prevails in and between Asia and the Western Hemisphere, calling the success of the Trans-Pacific Partnership

agreement (TPP) as important for the U.S. as having “another aircraft carrier.” [1] [file:///C:/Users/Rahul/Downloads/The%

20New%20Strategic%20Environment%20of%20the%20Trans-Pacific%20-%20Evan%20Ellis%20-%20FINAL%20(1).docx#_ftn1][file:///C:/Users/Rahul/Downloads/The%20New%20Strategic%20Environment%20of%20the%20Trans-Pacific%20-%20Evan%

20Ellis%20-%20FINAL%20(1).docx#_ftn1]

Page 1 of 16FEATURED | The New Strategic Environment of the Trans-Pacific : A U.S. Perspective ...

6/12/2015http://www.indrastra.com/2015/06/FEATURED-New-Strategic-Environment-of-Trans-Pac...


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22nd APEC Summit at Beijing, November 2014

PHOTO COURTESY: Straits Times

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The U.S. is not alone in recognizing the strategic importance of the Pacific. The People’s Republic of China (PRC) is

similarly maneuvering to assure that the organizations and rules for commerce between Asia and the Western

Hemisphere are as favorable as possible to its own interests, proposing a new “Free Trade Area of the Asia

Pacific” (FTAAP) at the November 2014 Asia Pacific Economic Cooperation forum (APEC) leaders’ summit in Beijing, as

an alternative to the TPP.

Nor is the contest over the TPP and the alternative FTAAP the only front in the struggle to define the regime that prevails

in the Pacific. In January 2015, the PRC hosted a summit with the Community of Latin American and Caribbean States

(CELAC), lavishing promises of loans for, investment in, and trade with, member states of the organization. The China-

CELAC summit parallels the approach used by the PRC in engaging the nations of Africa through the Forum on China-

Africa Cooperation (FOCAC), established in October 2000. In both cases, its region-level multilateral engagement

focuses on distribution of gifts to individual regimes from a benevolent PRC, grouping those countries on China’s terms,

yet relating to each separately.




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yf0/VXppRTGtE9I/AAAAAAAABk0/FA4GW0pwiak/s1600/logo_alba.jpg]

Bolivarian Alliance for the Americas (ALBA) [http://albainfo.org/]

The re-emergence of the PRC as a global power has not only increased economic, political, and other interactions

across the Pacific, but as the struggles over TPP, FTAAP and the China-CELAC forum suggest, it has also increased the

strategic importance to the norms, rules, and structures that govern those interactions. For Latin America and the

Caribbean, as well as for the United States, Canada, and the countries of Asia, the ability to prosper in the evolving

global economy, and to a degree, their position as nations in the global order, are strongly affected by the “regime” of

formal and informal norms, rules and governance structures that prevail in the area encompassed by Asia and the

Americas. Ensuring that this regime is characterized by rule of law, free trade, protection of intellectual property, anddemocratic governance is a strategic imperative, not only for the United States, but also for the rest of the community of

nations on both sides of the Pacific which aspire to an equal opportunity to prosper from their own achievements.

The struggle for the future “regime of the Pacific” is not going well, in part, because the U.S. has only focused on half of

the problem. Although the Obama administration’s much discussed “re-balance to the Pacific” technically includes the

Western Hemisphere as part of the area of focus, in reality, attention has been predominantly directed to Asia. [2]

[file:///C:/Users/Rahul/Downloads/The%20New%20Strategic%20Environment%20of%20the%20Trans-Pacific%20-%20Evan%

20Ellis%20-%20FINAL%20(1).docx#_ftn2] [file:///C:/Users/Rahul/Downloads/The%20New%20Strategic%20Environment%20of%

20the%20Trans-Pacific%20-%20Evan%20Ellis%20-%20FINAL%20(1).docx#_ftn2]

The continued growth and domestic stability of the PRC, and the sustained rule of the Chinese Communist Party will play

an important role in shaping the strategic landscape in the Pacific, as will the interaction of China with its Asian

neighbors, including strategic projects such as the China-funded “Silk Road,” and institutions such as the new Asia

Infrastructure Investment Bank (AIIB).

Nonetheless, on the “other” side of the Pacific as well, the political and institutional orientation of the Western

Hemisphere, and the policies of its governments regarding trans-Pacific trade and investment, associated agreements

and organizations, and the posture toward foreign participation in domestic markets, will play a significant role in defining

the formal institutions and rules, and the informal norms of governance that prevail in the Pacific.

The relationship of the America’s with Asia brings into play multiple levels of identity in both regions, as well as

competing interests and perspectives regarding how the Americas can most effectively engage with Asia and the rest of

the global economy.

At the hemispheric level the Americas are currently divided between competing vision for engaging with Asia and the

global economy. One, loosely represented by the U.S., Canada and the nations of the Pacific Alliance, emphasizes free

markets, improving efficiencies and expanding synergies between member states. The other, represented by the

regimes of the Bolivarian Alliance for the Americas (ALBA), Argentina, and to some degree, Brazil, emphasizes the role

of the state in brokering international commerce, regulating access to markets, redressing social inequities, and driving




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development. Such differences echo debates within the region during the Cold War, regarding how to engage with the

global economy, although the current discourse is as much about China, as about the United States, complicating the

traditional alignment between economic ideology and foreign relations preferences among groups in the region.

On the Asian side of the Pacific, as China relates to Latin America and the Caribbean in the context of such divisions and

complexity in the Western Hemisphere, it has adeptly alternated between a more market-oriented style of engagement,

and state-to-state interactions, as appropriate to the posture of its partner.

It has also advanced its strategic objectives in the Western Hemisphere through an adept combination of multilateral and

bilateral engagement. Through its multilateral relationship with CELAC, for example, the PRC conducts quasi-political

engagements with the region, including nations that do not diplomatically recognize it, such as Paraguay, most of Central

American and about half of the Caribbean. Indeed, the Dominican Republic, which currently does not have diplomatic

relations with the PRC, will formally represent CELAC to the PRC in 2017 when it holds the presidency of the

organization 2017.

The China-CELAC relationship further allows the PRC to facilitate work for its construction and other companies in the

region through multilateral development funds such as the $35 billion fund for the region that Chinese President Xi

announced in Fortaleza, Brazil during his July 2014 trip to the region,[3] [file:///C:/Users/Rahul/Downloads/The%20New%

20Strategic%20Environment%20of%20the%20Trans-Pacific%20-%20Evan%20Ellis%20-%20FINAL%20(1).docx#_ftn3] or the

BRICS bank, initially capitalized at $50 billion. Yet at the same time, the PRC also courts each of the region’s

governments individually, leveraging the size of the Chinese economy, the enormous quantities of money it has available

to lend or invest, and its ability to coordinate between government, companies, and financial institutions, in order to

secure commitments and terms advantageous to its interests.

Beyond the PRC as well, the activities of nations such as Japan, Korea, Russia, and India in Latin America and the

Caribbean are also relevant, and will play an important role in coming years in shaping the system of governance that

emerges across the Pacific. The interests of these Asian actors in the region are, at times, competing, and at timescomplimentary, creating complex dynamics within the Western Hemisphere, as well as interesting options for multilateral

strategic partnerships.

Latin America’s Competing Visions for Engaging with Asia

By contrast to the debates in Latin America and the Caribbean during the 1960s and 1970s regarding the region’s

participation in the international system as a vehicle for development, the region today is not divided over the question of

whether to engage economically and politically with Asia, so much as how to do so.[4]





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As noted previously, in engaging with Asia and the rest of the world economy, a subset of Latin American nations loosely

represented by the Pacific Alliance (Mexico, Colombia, Peru and Chile), have chosen to build their engagement strategy

around free markets, transparency, and the rule of law. The approach leverages relatively strong institutions in those

nations, and seeks to interact with countries like the PRC in a fashion beneficial to member states by eliminating

impediments to the free flow of goods, capital, people, and information between member states. The achievements of the“Pacific Alliance approach” to date include the elimination of tariffs on 92% of trade between member countries, the

creation of common stock market between Colombia, Chile, Peru and Mexico (“MILA”) and coordination between trade

promotion activities in consulates abroad. Future plans include greater and more efficient flow of intellectual capital

between members through programs such as student exchanges and reciprocal acceptance of university degrees in

member nations.

The concrete advances achieved by the Pacific Alliance in the four years since the April 2011 Lima declaration

committing to form the organization, has generated considerable enthusiasm throughout the region and beyond. In

addition to its four members, 32 states have associated themselves with the Alliance as observers, including Asian states

Australia, New Zealand, China, Japan, and South Korea. The Alliance has also expressed an interest in establishing

relationships with other multilateral organizations, including the Association of Southeast Asian Nations (ASEAN) and

Mercosur.[5] [file:///C:/Users/Rahul/Downloads/The%20New%20Strategic%20Environment%20of%20the%20Trans-Pacific%20-%

20Evan%20Ellis%20-%20FINAL%20(1).docx#_ftn5] [file:///C:/Users/Rahul/Downloads/The%20New%20Strategic%20Environment%

20of%20the%20Trans-Pacific%20-%20Evan%20Ellis%20-%20FINAL%20(1).docx#_ftn5]

Yet despite its achievements, and international interest in the organization, there are some causes for concern regarding

the organization’s continuing advance. In April 2014, Colombia’s constitutional court ruled that the manner in which the

nation had entered the Pacific Alliance was not constitutional.[6] [file:///C:/Users/Rahul/Downloads/The%20New%20Strategic%

20Environment%20of%20the%20Trans-Pacific%20-%20Evan%20Ellis%20-%20FINAL%20(1).docx#_ftn6] There has been little

discussion on how the ruling affects the nation’s current alliance membership, and while the ruling theoretically permits

Colombia to “re-join” the Alliance through constitutionally acceptable procedures, the issue has not yet been resolved.

Beyond Colombia, Costa Rica, which seemed to be on the fast track to move from observer to full alliance member, has

not progressed as quickly as hoped in adapting its laws and regulations, or completing the other steps required to

formalize the process.

The focus of the most recent summit of the Pacific Alliance, in June 2014 in Punto Mita, Mexico, was developing external

ties to the Pacific, rather than deepening integration between member states, per se.[7]


20Ellis%20-%20FINAL%20(1).docx#_ftn7]Yet it was notable that the meeting lacked announcements of significant progress

on the deepening of cooperation between members, as has been the case in prior summits.[8]




On the other hand, candidate Pacific Alliance member Panama has moved closer to formally joining the Alliance; in April

2015, the country’s legislature, and that of Mexico, ratified a free trade accord between the two, meaning that Panama

now has the trade agreements with all alliance members required to join the block.

The obstacles in the advance of the Alliance, also include the changing internal politics of its members. The government

of Michelle Bachelet in Chile, who returned to power in March 2014, is based on a much more left-of-center political

coalition than her Concertación government during her 2006-2010 term in office. The parties in her new coalition are

arguably more reluctant to embrace what are seen as neoliberal associations, including the Pacific Alliance and Trans-

Pacific Partnership. Complicating matters, her government has also been distracted by a bribery scandal.[9]




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20Ellis%20-%20FINAL%20(1).docx#_ftn9] In Peru, the government of Ollanta Humala has similarly been bogged down a

national polemic surrounding revelations of eavesdropping by its intelligence organization, the DINI, on politicians,

ournalists, and business leaders, among others.[10] [file:///C:/Users/Rahul/Downloads/The%20New%20Strategic%

20Environment%20of%20the%20Trans-Pacific%20-%20Evan%20Ellis%20-%20FINAL%20(1).docx#_ftn10]



By contrast to the Pacific Alliance, as noted previously, the governments of ALBA, Argentina, and to an extent, Brazil,

have pursued a model of engagement with Asia that places a greater emphasis on the role of the state, vis-à-vis the

market. While there is a diversity of policy orientations within this group on engagement with Asia, a pattern may be

observed regarding the orientation of these governments that gives the state a relatively greater role than that given by

the Pacific Alliance block, in three areas: (1) protecting domestic interests from foreign economic competition, (2)

regulating and channeling foreign investment and financing in the country, and (3) awarding public contracts.

The regimes of ALBA and Argentina have been particularly active in channeling Chinese credit and investment into the

country through deals in which the state plays a leading role. Since 2005, such loans to these governments have

accounted for 75% of the $119 billion lent to the region by Chinese policy banks such as China Development Bank and

China Ex-Im bank.[11] [file:///C:/Users/Rahul/Downloads/The%20New%20Strategic%20Environment%20of%20the%20Trans-

Pacific%20-%20Evan%20Ellis%20-%20FINAL%20(1).docx#_ftn11] Venezuela and Ecuador have been particularly active insecuring such financing, using loans from China in state-to-state deals to fund infrastructure projects and purchase

Chinese goods, including work on Ecuadoran hydroelectric facilities such as Coca Coda Sinclair, Sopladora,

Delsitanisagua, and Minas San Francisco, [12] [file:///C:/Users/Rahul/Downloads/The%20New%20Strategic%20Environment%

20of%20the%20Trans-Pacific%20-%20Evan%20Ellis%20-%20FINAL%20(1).docx#_ftn12] as well as the 2 million Haier

appliances bought by Venezuela’s government to be sold at a discount to the poor (largely supporters of the regime)

during the run-up to the 2012 elections. [13] [file:///C:/Users/Rahul/Downloads/The%20New%20Strategic%20Environment%

20of%20the%20Trans-Pacific%20-%20Evan%20Ellis%20-%20FINAL%20(1).docx#_ftn13]




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While not pursuing the populist socialist model used by Venezuela, Argentina and Brazil have also given the state a

leading role in engaging with the PRC, including currency swaps between Argentine and Chinese banks, secured

through state-to-state negotiations in 2009 and 2014, as well as the $30 billion state-negotiated China-Brazil currency

swap of 2013.

In addition, the Brazilian and Chinese governments have negotiated multiple loans from Chinese banks for the Brazilian

state oil company Petrobras, including a $10 billion deal in 2009, and $3.5 billion in 2015 to help rescue the company

from the liquidity crisis brought on by the deepening Petrobras bribery scandal. [14] [file:///C:/Users/Rahul/Downloads/The%20New%20Strategic%20Environment%20of%20the%20Trans-Pacific%20-%20Evan%20Ellis%20-%20FINAL%20(1).docx#_ftn14]



In Argentina, the government of Cristina Fernandez has played a high-profile role in negotiating with the PRC for a

package for financing and building the Jose Cepernic and Nestor Kirchner hydroelectric facilities on the Santa Cruz

River, as well as for upgrading the Belgrano-Cargas railroad system, which the Argentine state is in the process of

nationalizing. [15] [file:///C:/Users/Rahul/Downloads/The%20New%20Strategic%20Environment%20of%20the%20Trans-Pacific%

20-%20Evan%20Ellis%20-%20FINAL%20(1).docx#_ftn15]

Both Argentina and Brazil, as well as Venezuela and Ecuador, have also leveraged state control of the oil sector to

negotiate access for Chinese companies, and both have been notable in their use of tariff barriers and other legal

restrictions to protect domestic producers from competition by Chinese (and other foreign) products.

From a Chinese perspective, despite the challenges of dealing with the protectionism of Argentina and Brazil and the

dysfunctionality of Venezuela, the state-to-state approach to engagement has served the PRC well in securing deals on

advantageous terms for Chinese companies, particularly in the more personality-driven, weakly-institutionalized ALBA

states. It has allowed the PRC to leverage its strengths in coordinating the efforts of its ministries, banks and companies

to secure work commitments and market access without the burdensome requirements of Western-style competitive

bidding. It has done so, in part, through a less-than-transparent process of providing targeted benefits to the government

elites who have administrative control or influence over the contracts and other benefits to be given to the Chinese.[16]



In the process, such state-to-state deals have also reinforced the political power of those Latin American leaders who

engage in them. In part, this is because of the discretion afforded to leaders in weakly institutionalized states such as

Venezuela to guide who receives the lucrative intermediation and support contracts surrounding the deal, and by




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providing a funding stream from the PRC that frees such leaders from going to their own legislatures for funds, or to

international institutions such as the International Monetary Fund (IMF) or Inter-american Development Bank (IADB),

which typically impose more invasive oversight requirements.

If the nature of “statism” pursued by Brazil and Argentina toward the PRC is substantially different from that of the ALBA

states, it is also important to recognize that not all of the ALBA countries have engaged with the PRC with equal fervor.

The Bolivian government of Evo Morales, for example, has been relatively reluctant to commit to major state-led deals

with the PRC, with Bolivia’s state petroleum firm YPFB maintaining Chinese firms at the margins of the country’s gas andoil sector. Moreover, a number of projects thought to have been earmarked for PRC-based firms, such as the $900

million Rositas hydroelectric facility,[17] [file:///C:/Users/Rahul/Downloads/The%20New%20Strategic%20Environment%20of%

20the%20Trans-Pacific%20-%20Evan%20Ellis%20-%20FINAL%20(1).docx#_ftn17] have not been awarded to them.

Of the ALBA states, Ecuador and Nicaragua’s relationships with China and other Asian actors arguably have the greatest

potential to shape the emerging regime of the Pacific. Not only does each have a Pacific coastline, but each is uniquely

positioned to redefine ALBA through its action or inaction, as the political and economic collapse of the block’s former

leading member Venezuela plays itself out.

For Ecuador, the potential for such influence derives from of President Correa’s intellectual and strategic orientation, in

combination with the relative effectiveness with which he has employed funds from the PRC in Ecuadoran infrastructure

projects.[18] [file:///C:/Users/Rahul/Downloads/The%20New%20Strategic%20Environment%20of%20the%20Trans-Pacific%20-%

20Evan%20Ellis%20-%20FINAL%20(1).docx#_ftn18]

Nicaragua, for its part, despite not having diplomatic relations with the PRC, stands poised to leverage Chinese

companies and institutions for the possible $50-$70 billion trans-continental canal that would transform the country and

the region. Beyond the money flows and associated political leverage afforded to Nicaragua through such a waterway,

the existence of the canal and its governance, if built, would factor into the calculations of virtually all Western

Hemisphere and trans-Pacific maritime logistics going forward.

As with the Pacific Alliance, influence of the ALBA approach to engagement with the Pacific to shape the emerging

community of the Pacific is subject to considerable uncertainty. As noted previously, the block’s leading member and

source of funding is in a process of financial and political implosion. Bolivia’s leader Evo Morales has, to date, played

more of a participatory, than a leadership role in ALBA, and his ability to substantially influence the block, let alone the

regime that prevails in the Pacific, from his land-locked country is untried, at best. Ecuador’s President Correa, while

astute, is reportedly seen as arrogant by some of his peers. In Nicaragua, the trans-oceanic canal upon which the future

of the country and the Sandinista regime arguably rests, may be on the brink of unraveling, with the Canal’s international

representative, Ronald McLean formalizing his resignation in April 2015,[19] [file:///C:/Users/Rahul/Downloads/The%20New%

20Strategic%20Environment%20of%20the%20Trans-Pacific%20-%20Evan%20Ellis%20-%20FINAL%20(1).docx#_ftn19] and with

the date established by the project plan for beginning major excavation already well past without evidence that such work

will commence.[20] [file:///C:/Users/Rahul/Downloads/The%20New%20Strategic%20Environment%20of%20the%20Trans-Pacific%

20-%20Evan%20Ellis%20-%20FINAL%20(1).docx#_ftn20] [file:///C:/Users/Rahul/Downloads/The%20New%20Strategic%


In addition to the aforementioned governments, the activities of Argentina and Brazil will also play an important role inshaping the regime that emerges across the Pacific. Yet the posture of each is highly uncertain. Argentina faces

national elections in October in which a victory by the opposition could reorient or even halt major state-coordinated

initiatives such as the Belgrano-Cargas railway and the Nestor Kirchner and Jose Cepernic hydroelectric projects. In

Brazil, the Petrobras bribery scandal opens the door to significant change in management of the oil sector, and possibly

even impeachment of the current Rousseff government, with an associated paralysis in, followed by significant changes

to the orientation of Brazil’s government.




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With respect to MERCOSUR, to which virtually all of the statist actors discussed in this work are bound, members of the

Pacific Alliance have expressed interest in greater collaboration with the organization. Doing so would potentially the

Pacific Alliance greater leverage as it engages with the countries of Asia, but it could also distract the alliance with inter-

block negotiations, and dilute the policy consensus that has enabled its rapid advances to date. Nor is it clear whether

MERCOSUR can engage with the Pacific Alliance as a block. Internal differences between members recently blocked

the culmination of a free trade agreement between MERCOSUR and Europe,[21] [file:///C:/Users/Rahul/Downloads/The%

20New%20Strategic%20Environment%20of%20the%20Trans-Pacific%20-%20Evan%20Ellis%20-%20FINAL%20(1).docx#_ftn21]

and the smaller states of the organization, Paraguay and Uruguay, have signaled interest in engaging with the Pacific Alliance on their own.

At the trans-regional level, another important battleground shaping the regime of the Pacific is the BRICS. In addition to

the organization’s political project to project itself as a spokesman for the developing world, the organization’s new bank,

announced during Chinese President Xi’s July 2014 trip to Latin America, has the potential to reshape the system of

financial governance in the Pacific and beyond. The level of transparency and the criteria that it applies in awarding and

managing its loan portfolio, and the manner in which it interacts with established institutions such as the World Bank,

International Monetary Fund, Inter-American Development Bank, and Caribbean Development Bank, will be critical in

determining its impact on the regime of the trans-Pacific.

Finally, the regime that dominates the Pacific will also be influenced by which multilateral organizations prevail in

representing the Americas as a whole. Although few of the region’s diplomats openly acknowledge it, the region isengaged in a superficially friendly, yet crucial struggle pitting the Organization of American States (which has historically

represented the region), against UNASUR and CELAC, which define the region in a way that explicitly excludes the

United States and Canada.

While CELAC currently has very little institutional capability, the PRC has chosen to abet it in this struggle by using the

organization as its principal vehicle for conducting multilateral diplomacy with the Americas. The China-CELAC summits,

like those of FOCAC with Africa, have become vehicles for the PRC to unveil and celebrate large region-wide investment

funds, such as the previously-mentioned $35 billion Latin America loan fund, creating the possibility that Chinese funding




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could be instrumental in giving CELAC an institutional identity that allows it, rather than the more democratic and fully

representative OAS, to become the principal mechanism for multilateral governance in the Americas.

The Shadow of China’s Future

While the regime that prevails across the Pacific will be shaped by Latin America to a greater extent than is commonly

acknowledged, the giant “dragon in the room”[22] [file:///C:/Users/Rahul/Downloads/The%20New%20Strategic%

20Environment%20of%20the%20Trans-Pacific%20-%20Evan%20Ellis%20-%20FINAL%20(1).docx#_ftn22] is how the currentdeceleration of growth in the PRC, and the political reforms, the Communist party “rectification,” and the rest of the “anti-

corruption campaign” underway in that country play out.

First, slowing growth in the PRC may weaken its appeal for Latin American businessmen and politicians as a lucrative

market and purchaser of the region’s commodities. Decreasing demand from the PRC will likely further depress

commodity prices, lowering net revenues received by Latin America for their exports, thus hurting growth in those

economies of the region most dependent on commodity exports to the PRC, including both Pacific Alliance members

such as Peru and Chile, as well as ALBA members Venezuela, Ecuador and Bolivia, and to some degree, Brazil.

In such a scenario, as commercially viable opportunities for infrastructure, housing and other construction projects in the

PRC become more scarce, and as Chinese banks come under pressure to offset non-performing loans in the PRC with

commercially viable ones abroad, Chinese banks, construction firms, and even manufacturers could become more

aggressive in seeking overseas markets such as in Latin America and the Caribbean.

If, on the other hand, the Chinese economy collapses, perhaps through a reinforcing cycle of economic hardship and

political unrest,[23] [file:///C:/Users/Rahul/Downloads/The%20New%20Strategic%20Environment%20of%20the%20Trans-Pacific%

20-%20Evan%20Ellis%20-%20FINAL%20(1).docx#_ftn23] the impact on Latin America would be very different. PRC

investment in, and loans to Latin America could decline dramatically, compounded by a fall in the value of Chinese

commodities purchased from the region, which would likely extend to the agricultural sector. Brazil and Argentina would

be hard-hit by simultaneous decreases in the value of their agricultural, mining, and petroleum exports. Yet the most

adverse effects would likely occur in the regimes of ALBA, since they have come to depend on the PRC, with few other

alternatives, to finance their government programs, as well as to purchase their commodity exports, and invest in their

extraction. Such a shock, as Venezuela teeters on the verge of collapse and the Nicaragua Canal project falls apart,

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could precipitate the collapse of ALBA as a political project and generate a fundamental reorientation of economic

ideology across the Americas on the scale of that which occurred at the end of the Cold War.

Recommendations for the U.S.

The United States alone cannot, and should not try to prevent the PRC or other extra-hemispheric actors from

developing relationships with the countries of Latin America and the Caribbean. Yet the ability to prosper in the evolving

world order of the 21st Century, for the U.S. and other countries desiring an even playing field to prosper from the fruits oftheir own efforts, requires that the system of formal and informal governance that prevails across the Pacific is dominated

by rule of law, free markets, and transparent and fair competition. Such a regime will prevent large states such as the

PRC, with the ability to coordinate government, commercial, and financial sectors, from exploiting that size and

coordination to gain access to the markets, technology and resources of the other states in an unfair manner, on

unbalanced terms.

The rules, and the weights of each actor in the institutions of that trans-Pacific regime will almost certainly need to

change from the status quo to reflect changes in the size of, and relationships between, each of the actors, but the

existence of transparency, rule of law, free markets and open commercial competition, highlighted previously, is

fundamental.

While the achievement of such a trans-Pacific regime does not depend solely, or even principally, on the United States, it

does require that the U.S. adjust its approach toward both Asia and the Americas.

The U.S. must begin with an integrated “Trans-Pacific” strategy that seeks synergies between its activities in, and the

dynamics of, both regions. The U.S. must clearly articulate the values it represents, and the benefits of its approach for

the economic development, political sovereignty, human dignity, and quality of life of those on both sides of the Pacific.

While it communicates that story, it should admit mistakes where appropriate, and modify its approach based on local

conditions, empirical successes, and its own shortcomings.

The U.S. Trans-Pacific strategy must, of necessity, utilize a whole-of government approach, focused on strengthening

institutions in both the Americas and Asia, as well as fortifying transparent, egalitarian, and democratic governance




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frameworks in both the formal and informal spheres, for managing the issues of trade, investment, finance, migration,

knowledge flows, and environment that arise from the growing commercial and informational ties between the regions.

As part of the emerging trans-Pacific framework, the United States should advocate more strongly for the opening of

APEC to new members, particularly those from Latin America. Several states from the region, including Colombia and

Costa Rica, have long lobbied to join, yet have been precluded from doing so by the moratorium that the organization

has imposed on accepting new members since 1997. Yet the United States should also insist that its support is

conditional on the commitment of new members to free trade, transparent institutions, democracy, and the rule of law.Supporting the incorporation of new members into APEC in this fashion would strengthen the organization as a vehicle

for promoting a trans-Pacific regime in which all states had an equal opportunity to prosper, while also allow the United

States to help its Latin American neighbors build constructive, market-oriented relationships across the Pacific including,

but not biased toward, the PRC.

Beyond APEC, the United States should also prioritize the successful completion and entry into force of the Trans-Pacific

partnership. As a necessary condition, the Republican-controlled U.S. Congress should allow the advance of free trade

and rule of law to prevail over its aversion to the current Democratic administration, granting it “fast track” trade

promotion authority, under which the Congress could not add amendments to the final accord, but only decide whether to

accept or reject it through a single “yes-no” vote.[24] [file:///C:/Users/Rahul/Downloads/The%20New%20Strategic%


With or without the TPP, the U.S. should also work to strengthen bilateral trans-Pacific bonds between Asian and Latin

American states sharing U.S. values regarding democracy, rule of law and free markets. U.S. institutions could, for

example, work with the Japanese, Korean, and Indian governments to facilitate their investment in similarly-oriented

Latin American and Caribbean states such as Chile, Colombia, Mexico, Panama, and Trinidad and Tobago, on the

condition that the Asian companies interested in such investments also demonstrated a good track record of

transparency and adherence to international laws and norms on issues such as bribery, environmental compliance, and

good corporate citizenship.

The United States can also strengthen such trans-Pacific ties among nations that share its values at the sub-national

level. The U.S. can, for example, leverage its good reputation in University-level education by expanding programs to

study in the U.S. for students from both Latin America and Asia. Such an initiative should include not only technical

subjects, but also business and area studies programs to help prepare Latin American and Caribbean students to do

business in, and engage with, Asia, and to help students from Asia learn about, and prepare to do business in Latin

America and the Caribbean.

The approach should not be to “keep China out,” of the region, nor to preserve the current institutional rules or balance of

power, but to integrate the P.R.C. and other actors into an institutional framework that all can live with.

As it builds such ties at all levels, the United States should also look for opportunities to work with the PRC and the

Chinese people where the interests of the two countries coincide, and where the benefits of collaboration outweigh the

costs. Candidate areas include the maintenance of transparent, healthy trans-Pacific financial systems and capital

markets, achieving greater efficiencies in international transportation systems and customs clearances processes,

strengthening standards for trade accounting and investment protection, and combating trans-Pacific money launderingand organized crime.

Even as the United States facilitates stronger ties between states sharing its values across the Pacific, it must also

strengthen its own bilateral relationships with the countries on each side. With respect to Latin America, the U.S. can do

more to give preferential access to its markets for Latin American producers, as well as using tax breaks and other

incentives to induce U.S. based corporations to invest more in the region. A more generous U.S. immigration policy,

normalization of the status of those immigrants legally in the U.S., and work to bring down transaction fees for

remittances from the U.S. to Latin America would similarlygo far to build goodwill toward the U.S. Reforming U.S. drug

and gun control policies, like its Cuba policy, would also do much to remove such distracting issues from the table,




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enabling the country to focus its resources more fully on the strategically critical question of the regime that prevails in

the Pacific.

Finally, in both Asia and the Western Hemisphere, the U.S. must do a far better job with strategic communications, in

selling the value of free markets, democratic governance, and the rule of law as the approach best suited to leverage

expanding trans-Pacific interactions to bring sustainable development for all parties, as well as “follow-through,” to

ensure that the nations of the world reap and perceive the benefits from pursuing the free market and transparent, rule of

law policies, and democratic institutions that the U.S. promotes in its public diplomacy.

At the end of the Cold War, many Latin American and Caribbean states adopted neoliberal economic policies advocated

by the U.S., yet as it celebrated its ideological triumph and “the end of history,” the U.S. arguably did not fully appreciate

its vested interests in ensuring that those policies also succeeded. The U.S. failure to invest adequate time and

resources to ensure that the Washington Consensus produced development across all parts of the societies that adopted

them, with lessened inequality, corruption and abuses, gave rise to the grievances which populist politicians such as

Hugo Chavez would later exploit to capture and consolidate power.

If the failure of the U.S., at the end of the Cold War, to invest in the success of the nation’s adopting its model contributed

to the rise of populism and the ultimate marginalization of the U.S. position in the Americas, the costs of inattention to the

definition of the regime that prevails across the Pacific in the 21 st Century, are far higher. It includes facing a powerful,

nuclear-armed China in a world in which the U.S. no longer possesses the combination of international good-will, military

dominance, and institutional leverage that it enjoys today, and in which returns to capital no longer flows principally to

companies based in democratically-oriented Western governments, and in which the dollar is no longer the principal

international reserve currency to sustain Washington’s fiscal policies. While some in Latin America, as well as in Asia,

might welcome such a possibility, it is ultimately a world in which none will be secure in their prosperity, national

sovereignty, or individual liberty. For those on both sides of the Pacific who share a commitment to such values, the

stakes are too high not to get it right. [https://www.blogger.com/null]

[https://www.linkedin.com/pub/robert-evan-ellis/75/79/19a]

[1] [file:///C:/Users/Rahul/Downloads/The%20New%20Strategic%20Environment%20of%20the%20Trans-Pacific%20-%20Evan%

20Ellis%20-%20FINAL%20(1).docx#_ftnref1]Prashanth Parameswaran, “TPP as Important as Another Aircraft Carrier: US

Defense Secretary,” The Diplomat , April 8, 2015, http://thediplomat.com/2015/04/tpp-as-important-as-another-aircraft-

carrier-us-defense-secretary/.


20Ellis%20-%20FINAL%20(1).docx#_ftnref2]See, for example, Richard Weitz, “Pivot Out, Rebalance In,” The Diplomat , May

3, 2012, http://thediplomat.com/2012/05/pivot-out-rebalance-in/ [http://thediplomat.com/2012/05/pivot-out-rebalance-in/] .




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20Ellis%20-%20FINAL%20(1).docx#_ftnref3]Beyond the $35 billion fund announced in Fortaleza, China has publicly

announced that it anticipates investing $250 billion in the region in the next decade.


20Ellis%20-%20FINAL%20(1).docx#_ftnref4]For a more detailed discussion, see R. Evan Ellis, “Latin America's Foreign

Policy as the Region Engages in China.” Security and Defense Studies Review. Center for Hemispheric Defense

Studies. Winter 2014.


20Ellis%20-%20FINAL%20(1).docx#_ftnref5]“The Presidents of the Pacific Alliance in New York City,” Official Website of the

Pacific Alliance, September 23, 2014, http://alianzapacifico.net/en/the-presidents-of-the-pacific-alliance-in-new-york-city/

[http://alianzapacifico.net/en/the-presidents-of-the-pacific-alliance-in-new-york-city/] .


20Ellis%20-%20FINAL%20(1).docx#_ftnref6]“Gremios, en alerta por fallo que tumbó ley de Alianza del Pacífico,” El Tiempo,

April 25, 2014, http://www.eltiempo.com/archivo/documento/CMS-13882095.


20Ellis%20-%20FINAL%20(1).docx#_ftnref7]Jan Martínez Ahrens, “La Alianza del Pacífico inicia su expansión hacia los

países asiáticos,” El Pais, June 20, 2014,

http://internacional.elpais.com/internacional/2014/06/20/actualidad/1403299453_596128.html.


20Ellis%20-%20FINAL%20(1).docx#_ftnref8]Nor, curiously, has the Alliance published any new official communiques on its

website since September 2014. Pacific Alliance. Official Website. http://alianzapacifico.net/en/2014/09/

[http://alianzapacifico.net/en/2014/09/] . Accessed April 9, 2015.


20Ellis%20-%20FINAL%20(1).docx#_ftnref9]“Bachelet denies any idea of stepping down, because of her family's corruption

scandal,” Mercopress, April 8, 2015, http://en.mercopress.com/2015/04/08/bachelet-denies-any-idea-of-stepping-down-

because-of-her-family-s-corruption-scandal.


20Ellis%20-%20FINAL%20(1).docx#_ftnref10]On April 1, 2015, the Peruvian National Assembly voted to oust the Prime

Minister, Ana Jara, over the scandal.


20Ellis%20-%20FINAL%20(1).docx#_ftnref11]Kevin P. Gallagher and Margaret Myers, "China-Latin America Finance

Database," Inter-American Dialogue. Accessed April 10, 2014, http://thedialogue.org/map_list.


20Ellis%20-%20FINAL%20(1).docx#_ftnref12]See R. Evan Ellis, China on the Ground in Latin America: Challenges for the

Chinese and Impacts on the Region. New York: Palgrave-Macmillan, 2014, pp. 29-30.


20Ellis%20-%20FINAL%20(1).docx#_ftnref13]“Programa Mi Casa Bien Equipada ofrece 14 mil equipos en Los Próceres,” El

Universal , August 29, 2012, http://www.eluniversal.com.


20Ellis%20-%20FINAL%20(1).docx#_ftnref14]Will Connors and Luciana Magalhaes, “Brazil’s Petrobras Obtains $3.5 Billion

in Financing From China Development Bank,” The Wall Street Journal, April 1, 2015, http://www.wsj.com/articles/brazils-

petrobras-obtains-3-5-billion-financing-from-china-development-bank-1427892756.


20Ellis%20-%20FINAL%20(1).docx#_ftnref15]“Cuáles son los puntos centrales del proyecto de reestatización del servicio

ferroviario,” La Nacion, April 9, 2015, http://www.lanacion.com.ar/1782983-cuales-son-los-puntos-centrales-del-proyecto-

de-reestatizacion-del-servicio-ferroviario.




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20Ellis%20-%20FINAL%20(1).docx#_ftnref16]See, for example, Fernando Villavicencio, Ecuador Made in China, Quito,

Ecuador: Artes Graficas Silva, 2013.


20Ellis%20-%20FINAL%20(1).docx#_ftnref17] “Bolivia negocia construcción de hidroeléctrica de 1.300 millones de dólares,”

La Razón, July 11, 2013, http://www.la-razon.com.

[18] [file:///C:/Users/Rahul/Downloads/The%20New%20Strategic%20Environment%20of%20the%20Trans-Pacific%20-%20Evan%20Ellis%20-%20FINAL%20(1).docx#_ftnref18]Yet China-funded projects in Ecuador have been mired in problems as well,

with delays in projects such as the Coca-Coda Sinclair hydroelectric facility and the Refinery of the Pacific.


20Ellis%20-%20FINAL%20(1).docx#_ftnref19]“Ronald McLean Abaroa Fuera de HKND Group,” La Prensa, March 17, 2015,

http://www.laprensa.com.ni/2015/03/17/nacionales/1800380-ronald-maclean-abaroa-fuera-de-hknd-group.


20Ellis%20-%20FINAL%20(1).docx#_ftnref20]“Nicaragua Canal Project Description,” HKND Group Official Website, January

5, 2015, http://hknd-group.com/upload/pdf/20150105/Nicaragua_Canal_Project_Description_EN.pdf.


20Ellis%20-%20FINAL%20(1).docx#_ftnref21]“'Mercosur does not exist': Uruguay should try a one to one deal with the

Europe,” MercoPress, February 1, 2015, http://en.mercopress.com/2015/02/01/Mercosur-does-not-exist-uruguay-should-

try-a-one-to-one-deal-with-the-europe.


20Ellis%20-%20FINAL%20(1).docx#_ftnref22]The expression is taken from the 2008 book of the same title by Kevin

Gallagher and Roberto Porzecanski (Stanford, CA: Stanford University Press).


20Ellis%20-%20FINAL%20(1).docx#_ftnref23]For the most prominent exposition of the political collapse portion of this

scenario, see David Shambaugh, “The Coming Chinese Crackup,” The Wall Street Journal , March 6, 2015,

http://www.wsj.com/articles/the-coming-chinese-crack-up-1425659198.


20Ellis%20-%20FINAL%20(1).docx#_ftnref24]U.S. Defense Secretary Ashton Carter recognized the critical strategic

importance of the Trans-Pacific Partnership, characterizing it as important to the rebalance to the Pacific as having

another aircraft carrier. See Prashanth Parameswaran, “TPP as Important as Another Aircraft Carrier: US Defense

Secretary,” The Diplomat , April 8, 2015, http://thediplomat.com/2015/04/tpp-as-important-as-another-aircraft-carrier-us-

defense-secretary/.

Posted 16 hours ago by IndraStra Global

Labels: Asia Pacific, Brazil, China, Pacific, South America, TPP, Transpacific, USA

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FEATURED | The New Strategic Environment of the Trans-Pacific : A U.S. Perspective by Dr. R. Evan Ellis

This article was first published at Política Externa , a leading Brazilian Foreign Policy Journal By Dr. R. Evan

Ellis Introduction In an April 2015 speech, U.S. Secretary

of Defense Ashton Carter affirmed the significance of the trade regime that

prevails...

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