Romney’s Plan for Pan American Free Trade does Nothing

On 21 Aug., Mitt Romney announced a trade policy “focused primarily, but not exclusively, on Latin America.”  The presidential hopeful outlined his desire to rekindle the flames of a Pan American free trade zone, a fire smothered in 2005 by opposition from Argentina, Brazil, Uruguay, Chile, Venezuela, Ecuador, Cuba, Nicaragua, Honduras, and Dominica.  The Free Trade Area of the Americas (FTAA) proposed in 1994 by President Clinton, would have created a 34 nation trading bloc – arguably the largest and most ambitious in the world, given the variability of development profiles among potential member states.

Widespread opposition to the plan contested the viability of free-trade between countries of such unequal economic power.  Latin American states feared the destruction of domestic production, in the face of highly competitive US firms.  The failed FTAA, partly inspired Venezuela, Bolivia, Ecuador, Cuba, Honduras, Nicaragua, and Dominica to form their own bloc, the Bolivarian Alternative for the Americas (ALBA): a trade agreement based on a reciprocal barter system.  Meanwhile, even US congress shied away from the proposal, over concerns that cheap labor costs in Latin America would lead to outsourcing, as well as the erosion of US agriculture to the farming giants of Brazil and Argentina.

The logo that never made it

Romney’s new plan seeks to build upon a network of smaller free-trade agreements (FTAs) already in place between the US and individual Latin American countries.  He proposes, joining these agreements to create a larger zone.  For example, separate FTAs between the US and Panama, and the US and Chile would be combined – requiring Chile and Panama to lower trade barriers with each other.

However, such a plan would most likely fail or produce an impotent version of an original proposal. Simply put, the US has little power to sway the Brazilian giant, which already scrambles to protect its resilient, yet troubled domestic industry.  Additionally, the US would bypass Argentina and other left-leaning ALBA states from an agreement.  Under these conditions, a Pan American free trade zone would include Chile, Colombia, Honduras, Panama, Costa Rica, Peru and Mexico.  But the US already has regional FTAs with Central America and Mexico, and Bilateral ones with Peru, Colombia, and Chile.  So essentially, a positive outcome means exactly what we already have, but under a different name.  Similarly, a negative outcome means exactly what we already have, plus another diplomatic failure.

Free Trade with the US is just plain unpopular.  The North American Free Trade Agreement (NAFTA) destroyed the livelihoods of hundreds of thousands of Mexican farmers at the gain of US industrial agriculture.  The Central American Free Trade Agreement (CAFTA) is not any better.  Moreover, increased economic power in Latin America combined with a historical distrust of US proposals, makes a comprehensive plan lead by the US extremely unlikely.  With Romney representing the hardline conservative face of US diplomacy in the Americas, Latin American leaders would be even more skeptical of a ‘mutually beneficial’ agreement.

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Follow Up

Peru Wants to Negotiate Free-Trade Pact With Indonesia

Peru finds new Asian partners

10 Septemeber, 2012

Nasdaq

LIMA, Peru–Peru wants a free-trade pact with Indonesia, adding to the number of other trade liberalization agreements the Andean nation has signed in recent years.

“Indonesia is a large south-east Asian nation with about 250 million persons. It is a multicultural nation and has an extremely large market.”

http://www.nasdaq.com/article/peru-wants-to-negotiate-free-trade-pact-with-indonesia—minister-20120910-01096

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