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Trading Away Stability and Growth: United States Trade Agreements in Latin America

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  • Kevin Gallagher
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    Abstract

    Since the early 1990s Latin American nations have been signing trade treaties with the United States that have brought small gains and high costs. Pending deals between the United States and Colombia and the United States and Panama are no different. Each is based on the same template that has been the cornerstone of US trade policy since the North American Free Trade Agreement (NAFTA). This paper analyses general equilibrium estimates of the gains from trade from numerous Latin American-US free trade agreements (FTAs) from the 1990s to the present, and juxtaposes such gains with the fiscal and regulatory costs associated with those treaties. It is clear that these nations are signing deals where the net benefits are ambiguous at best. Indeed, estimates show that the US-Colombia trade treaty pending in the US Congress would yield negative net welfare benefits for Colombia, cost the Colombian government $633 million in tariff revenue, and force Colombia to deregulate its financial and other sectors. The rest of the paper examines why Latin American nations would sign on to treaties that may not be in their interest. It is shown how many of the treaties signed are a result of asymmetric bargaining power between the US and a Latin American trading partner, a “race” to gain access to the US market before their competitors do, the dominance of right-wing political parties in Latin American countries at the time of negotiation, and a pervasiveness of “neo-liberal” ideas throughout elite decision-making circles throughout the nations that choose to sign treaties with the US.

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    Bibliographic Info

    Paper provided by Political Economy Research Institute, University of Massachusetts at Amherst in its series Working Papers with number wp266.

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    Date of creation: 2011
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    Handle: RePEc:uma:periwp:wp266

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    Related research

    Keywords: Trade and Economic Integration; Economic Development; Industrialization; and Financial Markets;

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    1. L. Alan Winters & Terrie L. Walmsley & Zhen Kun Wang & Roman Grynberg, 2003. "Liberalising Temporary Movement of Natural Persons: An Agenda for the Development Round," The World Economy, Wiley Blackwell, vol. 26(8), pages 1137-1161, 08.
    2. Brown, Drusilla K. & Kiyota, Kozo & Stern, Robert M., 2005. "Computational analysis of the Free Trade Area of the Americas (FTAA)," The North American Journal of Economics and Finance, Elsevier, vol. 16(2), pages 153-185, August.
    3. Carsten Kowalczyk & Ronald J. Wonnacott, 1992. "Hubs and Spokes, and Free Trade in the Americas," NBER Working Papers 4198, National Bureau of Economic Research, Inc.
    4. Olivier Cadot & Antoni Estevadeordal & Akiko Suwa-Eisenmann, 2004. "Rules of origin as export subsidies," Research Unit Working Papers 0405, Laboratoire d'Economie Appliquee, INRA.
    5. Nagesh Kumar & Kevin P. Gallagher, 2007. "Relevance of ‘Policy Space’ for Development : Implications for Multilateral Trade Negotiations," Trade Working Papers 22111, East Asian Bureau of Economic Research.
    6. Shubham Chaudhuri & Pinelopi K. Goldberg & Panle Jia, 2003. "Estimating the Effects of Global Patent Protection in Pharmaceuticals: A Case Study of Quinolones in India," NBER Working Papers 10159, National Bureau of Economic Research, Inc.
    7. Marcus Noland & Howard Pack, 2003. "Industrial Policy in an Era of Globalization: Lessons from Asia," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 358.
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