The SLEPT Aspects of the Free Trade Area of the Americas

By Ortiz, Jaime; Tajes, María | International Journal of Business, Summer 2009 | Go to article overview

The SLEPT Aspects of the Free Trade Area of the Americas


Ortiz, Jaime, Tajes, María, International Journal of Business


ABSTRACT

The Free Trade Area of the Americas (FTAA) attempts to become one of the most far reaching integration agreements in world's history. It will eventually eliminate all barriers to trade and investments and create a uniformed sense of democracy in the region. The stakes are high in terms of market size, trade volume, and overall output. The FTAA will not benefit its country members equally. A social, legal, economic, political and technological framework of analysis suggests the FTAA will greatly benefit the largest economies while severely hindering smaller ones. Furthermore, recent ascendancy of a political left among the region signals the FTAA may still remain conjectural.

JEL Classification: F10, F15, F36, F40, 051, 054

Keywords: Trade; Investment; Integration; Costs; Benefits; Americas

I. INTRODUCTION

The Free Trade Area of the Americas (FTAA) was originally born in 1994 at the Summit of the Americas in Miami to embrace all countries from Canada to Chile, with the exception of Cuba, into a single free trade area. Ever since, its negotiation process has gone on and off triggering passionate reactions across distinctive business, policymaking, and societal circles. A perspective from McKinney (2004) suggests the FTAA was intended to be the world greatest undertaking to provide job opportunities, contribute to education, deliver health services and, ultimately, empower freedom and democracy. Acquiring them all would depend on the ability and willingness of its countries to work together for a common goal. However, Jiang (2004) claims that people in FTAA countries have not motivated themselves to advance like European Union countries did before engaging into agreements of this caliber. Headed for few opportunities and rampant corruption, those countries were indeed able to strengthen their economies and become far more transparent.

The proposition of uniting all the economies of the Western Hemisphere came from the United States as a strategic priority and has evolved into a highly controversial regional integration initiative. Representatives from 34 democratic nations pledged on creating the FTAA and complete negotiations toward this agreement by 2005 (Salazar- Xirinachs and Maryse, 2004). Initially, working groups were established between 1994 and 1998 to identify issues within each territory as well as providing possible approaches. Position papers on "action items" ranging from market access through health services to dispute settlement and antidumping policies followed suit. Concurrently, policy-makers reflected also on the need countries had to form special committees to focus on crosscutting themes such as smaller economies, electronic commerce, and participation of civil society (Rivas-Campo and Tiago Juk Benke, 2003).

According to the Inter-American Development Bank (2007), openness to trade in the region has reached massive proportions. It actually has more than doubled in the past ten years. Imports have risen from 10 to 20 percent of their GDP and average tariff rates have dropped from 40 to less than 10 percent. As a result, regional trade has grown faster than world average in the last decade. Hester (2002) contends these efforts mean little compared to the opportunities available if these economies were to unite with the rest of the Western Hemisphere. Along these lines, Friedman (2007) staunchly argues that countries cannot become economically interdependent without the support of one another since trade and investment constitute the "backbone" of their overall existence. There are, however, lukewarm examples of trade coalitions such as the Central American Common Market established in 1960, the Southern Common Market signed in 1991, and the Andean Community initiated in 1997 which have all failed to show a consistent string of success stories over time.

Furthermore, FTAA negotiations have basically stalled since 2003 due to a rising ideological opposition at national and hemispheric levels for outlining a process that would redefine multilateralism. …

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