US Marks a Shift in Trade Policy Towards Lat Am
The US has 3 important bilateral trade deals in the pipeline with Latin American Countries—US-Peru, US-Colombia, and US-Panama. Also, as part of a regional trade pact, Costa Rica just voted on and passed a resolution to join US-CAFTA. (And on a side note, the US is negotiating yet another bilateral trade deal with South Korea). This shift for the US from Multilateral trade deals to bilateral marks an important one that is worthy of our attention. With the prospects of DOHA seeming ever dimmer, it is important to recognize the nonverbal signals that the US and USTR Susan Schwabb are giving to the world–the US doesnt care about DOHA or the WTO. I come to this conclusion because in the face of DOHA failing to progress forward combined with the fact that the US is not willing to budge on key issues like ag subsidies and greater access to manufactured imports, the US is telling the world and the international trade body…”look, if you dont want to do it our way, by our standards, we can still have our ways by using a piecemeal approach and start negotiating bilateral trade deals with countries all over the world, and not involve the WTO.” This raises two questions: 1) are bilateral trade deals more efficient than multilaterals? and 2) What does this mean for the US and Lat Am?
In dealing with the first question, the answer lies in the stakeholders. Sure bilateral trade deals are good, but they will not ever be as beneficial as a multilateral trade round which lowers trade barriers throughout the world on a uniform standard. The world and the global economy have much to gain from the success of the DOHA round. Similarly, the US has much to gain from the success of bilateral trade deals with Peru, Colombia and Panama….however the reverse is not always true. The US can bully Panama, Peru and Colombia into signing trade deals under US terms. Panama, Peru and Colombia clearly do not have the same negotiating power against the US. In the short term, the outlook looks good for all parties involved because Peru, Panama and Colombia will be granted special access to the US market, and the US will reduce tariffs on the imports of its goods in these three countries. In the long term, however, the prospects are different…in the future, as the US continues to export cheap goods into these developing countries, the producers of the same goods in the country will not have access to the US technology which makes US exports so competitive in their home markets, as a result US goods will satiate the domestic markets and many people will lose their jobs. It is highly unlikely that the US is going to outsource in Peru, Panama or Colombia at the same scales as it has in China or India because quite simply the markets in Peru, Panama and Colombia are not as big and the opportunity costs are higher.
The US-Peru FTA is about to pass because it is presumed that Congress will more than likely vote for it. There are sticky issues in Colombia due to drug trafficking in the country and poor labor standards, and in Panama there is a long standing issue with the murder/death of a US citizen in the country. Not to mention the fact that the newly elected democratic congress is not too keen on globalization and free trade. So all of this could be hogwash, but the trade deals are still on the desks of US congressmen and women and the near future will tell us what will happen.
The answer to question two is found in whether or not the 3 FTAs should pass, if they did, it would represent a strength of negotiating power for the US in the region. A great economist once said, that where goods and services cross borders, wars will not. AND this is important considering the strong and ever rising anti-US sentiments in Venezuela, Bolivia, and Ecuador. In essence, the US is buying its allies with these three FTAs.
Just on a realistic point of view…Panama, Peru, and Colombia have less negotiating power in a bilateral trade deal with the US than they do in DOHA because in the WTO they can hide behind the G20 which is led by Brazil. And as we all know, the G20 and Brazil have recently had quite a stronghold in the power structure of the WTO because they have recently been successful in standing up to the US and the EU. However, in their own individual agreements with the US, Panama, Peru and Colombia are weak and ill prepared to deal with US Trade lawyers. This represents yet another negative aspect in choosing bilateral trade deals over multilaterals with the US. Nonetheless, there seems to be a shift in the desire to sign bilateral FTAs in forefit of DOHA and that to me is a shame.
