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

  • Kevin Gallagher
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    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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    File URL: http://www.peri.umass.edu/fileadmin/pdf/working_papers/working_papers_251-300/WP266.pdf
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    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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    1. Drusilla K. Brown & Kozo Kiyota & Robert M. Stern, 2005. "Computational Analysis of the Free Trade Area of the Americas (FTAA)," Working Papers 528, Research Seminar in International Economics, University of Michigan.
    2. 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.
    3. 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.
    4. Cadot, Olivier & Estevadeordal, Antoni & Suwa Eisenmann, Akiko, 2005. "Rules of Origin as Export Subsidies," CEPR Discussion Papers 4999, C.E.P.R. Discussion Papers.
    5. 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, March.
    6. 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.
    7. 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.
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