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

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  • Kevin Gallagher

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.

Suggested Citation

  • Kevin Gallagher, 2011. "Trading Away Stability and Growth: United States Trade Agreements in Latin America," Working Papers wp266, Political Economy Research Institute, University of Massachusetts at Amherst.
  • Handle: RePEc:uma:periwp:wp266
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    File URL: https://www.peri.umass.edu/fileadmin/pdf/working_papers/working_papers_251-300/WP266.pdf
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    References listed on IDEAS

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    1. 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.
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    3. 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.
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    9. repec:wsi:wschap:9789812815330_0001 is not listed on IDEAS
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    More about this item

    Keywords

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

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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