The Hemisphere's Spaghetti Bowl of FREE-TRADE AGREEMENTS
Perales, Raúl, Americas Quarterly
To really seize the economic advantage of the mix of free-trade agreements in the region, countries need to weave them together into a seamless, powerful market. Here's how.
Twenty years after the launch of market reforms, Latin American countries are among the most active players in the international trading system, thanks to their participation in freetrade agreements (FTAs) and preferential market access accords.
As the network of Latin American and Caribbean free-trade agreements matures-with more than 20 intraregional FTAs signed-this is the time to work toward a convergence of the region's many agreements and market access rules. Greater coordination would not only strengthen individual economies but foster the region's global competitive position.
The fl urry of regional FTAs began with the 1994 North American Free Trade Agreement (NAFTA) involving Mexico, Canada and the United States. Over the next decade, Mexico went on to sign trade agreements with Costa Rica (1995), Chile (1999) and the European Union (2000), to name just a few. Those were followed in 2006 by a framework agreement between Mexico and the Common Market of the South (Mercosur)-setting the pace for a veritable wave of Latin American commercial diplomacy.
The passage of FTAs has helped Mexico and Chile become two of the world's most globalized countries. Chile alone now has 21 agreements with 58 countries, covering 92.5 percent of all merchandise exports and giving its products preferential access to 4.2 billion potential customers.1
Overall, the regional trend is to strike FTAs with advanced industrial countries in traditional markets (like North America and Europe), to seek nontraditional partners (especially in East and South Asia), and to conclude intraregional deals within the framework of existing regional integration schemes (like the Latin American Integration Association). Another important area of trade diplomacy is the development of new regional initiatives such as the Arco del Pacífico- a space created in 2007 for regular meetings among ministers of the 11 Latin American countries with Pacifi c Ocean coasts.
While the trend toward free trade has been generally positive, there have been some recent signs of backlash. For example, policymakers in Argentina added to their list of import restrictions in February 2012 the requirement that a Sworn Affi davit of Intention to Import be completed before importing any merchandise. Last December, Brazil slapped an additional 30 percentage-point tax on selected imported cars.
At the same time, Latin America's active trade agenda, and the signing of second-generation FTAs, has created an increasingly sophisticated cadre of trade diplomats and bureaucrats in government trade ministries. Newer agreements include clauses not included in earlier trade negotiations, covering areas such as competition policy, services and intellectual property. 2 As a result, FTAs are supporting new spheres of policymaking or the development of new mechanisms that have, in turn, assisted the modernization process in many states.
Peru, for example, created a ministry of environment in 2008 as part of the implementation of its free-trade agreement with the United States. That agreement, which went into effect in 2009, led to signifi cant policy changes that incorporated protection of the environment into Peru's increasingly complex economy.
Latin America's higher profi le in global commerce was transformative in other ways as well. Trade has become entrenched as an independent policy agenda, apart from demands of foreign policy or strategic interests. One result of this has been a new fl exibility in dealing with foreign investment and business-friendly regulatory standards.
Trade's emergence as a source of policy expertise in its own right has been especially noticeable in countries that have concluded the most FTAs: Mexico, Chile, Costa Rica, and Peru. …