South American Free Trade Area or Free Trade Area of the Americas?: Open Regionalism and the Future of Regional Economic Integration in South America by Mario Esteban Carranza

Author:Mario Esteban Carranza [Carranza, Mario Esteban]
Language: eng
Format: epub
Tags: Social Science, General, Sociology
ISBN: 9781351753388
Google: wIRHDwAAQBAJ
Publisher: Routledge
Published: 2017-11-22T04:38:54+00:00

Why would the Latin American countries be interested in an FTAA? Because it would attract US investment to the region. More importantly, the FTAA would allow the Latin American countries to gain "real" access to the US market, insuring them against a resurgence of US protectionism and "locking in" the opening of the huge US market for Latin American exports, especially of manufactured goods. Yet since US tariffs are already very low for most Latin American goods, arguably "Latin America's direct gains from hemispheric free trade will not be great."18

The Latin American (especially South American) countries are particularly interested in gaining access to the US market for their manufactured products. The fastest growing export sector for the Latin American countries is manufacturing. Manufactured goods constituted 23 percent of US imports from Latin America in 1980 and 56 percent in 1989. From this perspective, the US is potentially more important for Latin America than Latin America for the US, considering that Latin American growth and development is still heavily dependent on external factors, as shown by the Brazilian crisis of January/February 1999.

The other possible advantage of the FTAA is that it would provide the Latin American countries with an "insurance policy" against the possible formation of competing trading blocs in the world economy. At least in theory, the FTAA would allow the South American countries to follow Mexico's example and "jump upon the economic bandwagon of North-North development."19 Yet is being the junior partner of the "colossus of the North" really an advantage? Brazil has pursued the parallel track of the SAFTA proposal to have its own "insurance policy" and in 1994 it saw the creation of SAFTA as a precondition for hemispheric integration with the US through the FTAA.20

Trade between equals is not the same as trade between unequals. Because of the asymmetric nature of its relationship with the United States, Latin America may stand to lose politically from a free trade agreement with the "colossus of the North," for the reason pointed out by Albert Hirschman many years ago in his study of German trade pacts: "when a large, powerful country–for example, Germany or the United States–trade with a small, weak country, the gains to the latter come at the cost of its additional dependence on the former."21

For Latin America, the case against free trade with the United States stems from a long history of non-reciprocity in US policy toward the region.22 While US exporters would immediately benefit from lower tariffs for the entry of their products in the Latin American markets, as Naim points out, "asymmetric competitive pressures make nearly all Latin exporters extremely vulnerable to charges of dumping lodged by US companies. This vulnerability tends to be higher for exporters of manufactured goods than for exporters of raw materials."23 The real gains for Latin America would come from the elimination of US non-tariff barriers and countervailing duties on Latin American exports, especially of manufactured products. Brazil's protection of its pharmaceutical, telecommunications, and computer industries has been a

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