Trade Integration in the Americas

Publication Date: November 2005

Publisher: Library of Congress. Congressional Research Service

Author(s):

Research Area: Trade

Type:

Abstract:

Since the 1990s, the countries of Latin America and the Caribbean have been a focus of United States trade policy, as demonstrated by the passage of the North American Free Trade Agreement (NAFTA), the U.S.-Chile free trade agreement (FTA), and, more recently, the Central America-Dominican Republic Free Trade Agreement (CAFTA-DR). The Bush Administration has made bilateral and regional trade agreements important elements of U.S. trade policy. The United States currently is in the process of completing trade negotiations with Andean countries for an FTA and on reactivating talks for a U.S.-Panama FTA and a Free Trade Area of the Americas (FTAA). The FTAA is an on-going regional trade initiative that was first discussed in 1994 and formally started in 1998. The last FTAA trade ministerial meeting was held in Miami in November 2003, but the talks are currently stalled.

The efforts of the United States in regional trade integration in the Americas are significant for Congress because U.S. entry into any free trade agreement may only be done with the legislative approval of the Congress. U.S. supporters of trade integration in the Americas believe it helps U.S. economic and political interests in several ways. Proponents believe that the movement towards trade integration of the Americas is beneficial for U.S. prosperity, and also serves to strengthen democratic regimes and support U.S. values and security. Forming closer economic relations with countries in the region is seen by some as a means to improve cooperation on other issues such as the environment and anti-drug efforts. U.S. opponents of trade integration proposals are mainly concerned that hemispheric free trade would lead to a loss of jobs in the United States through increased import competition or as a result of U.S. companies shifting production to lower-wage countries with weak labor standards.

The number of regional trade agreements in the Americas has been increasing since the 1990s. Major trade arrangements include NAFTA, CAFTA-DR, the Southern Common Market (Mercosur) in South America , the Andean Community (CAN), the Caribbean Community and Common Market (CARICOM), the Central American Common Market (CACM), and the Latin American Integration Association (ALADI). With a total of 12 trade agreements involving over 40 countries, Mexico is one of the countries with the highest number of agreements. Supporters note that if countries in the Western Hemisphere ultimately establish an FTAA, it could have as many as 34 members and nearly 800 million people, nearly twice the population of the European Union.

Trade integration in the Americas is of interest to policymakers because of the implications for the United States. Issues under debate include the pros and cons of deepened trade relations with Latin America and the Caribbean, and whether the current focus on bilateral and regional FTAs is the most appropriate trade policy. Some analysts do not believe that such a policy is a good idea because it is creating a complicated network of trade agreements throughout the region could slow down the FTAA process. Others believe that regional trade agreements lead to the consolidation of regional trade areas into larger free trade areas, and although a slow process, may eventually lead to a hemispheric free trade area.