Export push into Latin America, talks to progress at quite a peso

Australia will become the first country to pursue a trade agreement with the exclusive Pacific ­Alliance bloc.

Trade Minister Steve Ciobo will start negotiations to join the Pacific Alliance trade bloc. Picture: AAP

Australia will become the first country to pursue a trade agreement with the exclusive Pacific ­Alliance bloc of Mexico, Peru, Chile and Colombia, whose combined economies total almost $2 trillion, as other nations compete to salvage new trade deals from the failed Trans-Pacific Partnership.

Negotiations will be announced today that could open the way for a major agriculture and services export drive into Mexico, which has a population of 127 million, and key economies of Latin America.

The Pacific Alliance is a major trading bloc that has been largely closed to Australian exports due to tariffs of up to 80 per cent on goods and services. The four countries account for 38 per cent of Latin America’s population and 57 per cent of its imports.

But key to a significant economic boost for Australia’s export industries, which have traditionally looked to north Asia, is ­Mexico, which is expected to be ­elevated into the top 10 of world economies in the coming decades.

Mexico is believed to want to boost trade ties with Australia with increasing uncertainty about its rocky relationship with the Trump administration.

It is understood that Australia had been working behind the scenes with Pacific Alliance ­countries, all of which are also members to the TPP, with the exception of Colombia, as it became increasingly clear that the US would ­torpedo hopes of ratifying the 12-nation trans-Pacific free-trade zone.

Trade Minister Steve Ciobo confirmed that he would ­announce the start of negotiations today before a meeting in Cali, ­Colombia, of the 12th Presidential Summit of the Pacific Alliance. An FTA with the alliance, whose combined imports are worth $700 billion, would allow Australian businesses to compete for the first time with the US, the EU and Canada, who already have preferential access through their bilateral deals with all four countries.

“This will present huge opportunities for Australian businesses,’’ Mr Ciobo said. “An FTA with the Pacific ­Alliance will create new ­export opportunities for Australian farmers, miners, manufacturers, educators, service providers and investors in some of Latin America’s key economies. Importantly, this FTA opens the door to Mexico for Australian businesses.

“Mexico is a major market; it’s home to more than 127 million people and its GDP is more than $1 trillion. The potential for Australian businesses to meet the growing needs of Mexicans through this FTA is massive.’’

An FTA with the alliance would allow better market access for goods including agricultural products, aluminium products, mining equipment, pharmaceuticals and paper in particular.

Australian services to benefit would include suppliers in education, mining-related services, ­financial services, telecommunications, tourism, environmental services and other professional services such as legal services, architectural design and accounting.

Two-way trade between the ­alliance countries and Australia was estimated at $5.8bn last year, but as a percentage of total ­imports of the Latin four, Australia ­accounts for just 0.2 per cent in terms of volume.

National Farmers Federation president Fiona Simson welcomed the news and claimed that up until now Australian farmers had been all but frozen out of trade with the Latin America countries.

“It simply has not been economical for Australia to export large quantities of produce to the region,” Ms Simson said.

“Meanwhile, our competitors, including the United States, Canada and the European Union, have enjoyed preferential access as a ­result of FTAs forged with the four countries.”

Mr Ciobo said Mexico wanted to diversify its imports and “Australia is well placed to meet its needs”.