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Institute for Workplace Studies----------------- Professor Samuel B. Bacharach
School of Industrial & Labor Relations-------- Director, Institute for Workplace Studies
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16 East 34th Street, 4th floor---------------------- Stuart Basefsky
New York, NY 10016 -------------------------------Director, IWS News Bureau
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Congressional Research Service (CRS)

 

U.S.-Latin America Trade: Recent Trends and Policy Issues

J. F. Hornbeck, Specialist in International Trade and Finance

June 25, 2010

http://opencrs.com/document/98-840/2010-06-25/download/1013/

[full-text, 13 pages]

 

Summary

Trade is one of the more enduring issues in contemporary U.S.-Latin America relations. Latin

America is far from the largest U.S. regional trade partner, but historically is the fastest growing

one. Between 1998 and 2009, total U.S. merchandise trade (exports plus imports) with Latin

America grew by 82% compared to 72% for Asia (driven largely by China), 51% for the

European Union, 221% for Africa, and 64% for the world. Mexico composed 11.7% of total U.S.

merchandise trade in 2009 and is the largest Latin American trade partner, accounting for 58% of

the region’s trade with the United States, the result of a long history of economic integration

between the two countries. By contrast, the rest of Latin America together makes up only 8.3% of

U.S. trade, leaving significant room for growth.

 

Latin American countries have made noted progress in trade liberalization, reducing tariffs

significantly and entering into their own regional agreements. This development presented an

opportunity for the United States, which has supported deeper regional integration, in part

because it has been widely viewed as beneficial for both economic and foreign policy reasons.

The United States has implemented comprehensive bilateral or plurilateral reciprocal trade

agreements with most of its important trade partners in Latin America. These include the North

American Free Trade Agreement (NAFTA), the Dominican Republic-Central America-United

States Free Trade Agreement (CAFTA-DR), and bilateral FTAs with Chile and Peru. FTAs with

Panama and Colombia have been signed but not implemented, pending congressional action.

 

Many of the largest economies in South America, however, are not part of U.S. FTAs and have

resisted a region-wide agreement, the Free Trade Areas of the Americas (FTAA), in part because

it represented an extension of the same trade model used by the United States in bilateral

agreements. Countries south of the Caribbean Basin have been reluctant to enter into such a deal

because it does not meet their primary negotiation objectives. Brazil, Argentina, and Venezuela

are less compelled to capitulate to U.S. demands because they are far less dependent on the U.S.

economy than countries in the Caribbean Basin, do not rely on previously existing unilateral

preferential arrangements, and would have to redefine their subregional trade pacts.

 

The result in the Western Hemisphere has been an expansive system of disparate bilateral and

plurilateral agreements, which are widely understood to be a second best solution for reaping the

benefits of trade liberalization. Alternatives to a new round of currently unpopular FTAs are being

debated. It has been suggested, for example, that FTAs be revised, enhancing controversial

environment, labor, and other chapters. The response in Latin, however, has been tepid. Another

option is to move incrementally toward harmonization or convergence of the vast array of trade

arrangements in the Western Hemisphere by adopting administrative solutions where possible,

without renegotiation. One example is to expand rules of origin and cumulation provisions.

 

With respect to FTA implementation, another critical issue is the provision of trade capacity

building and other technical assistance to address supply-side constraints in areas such as port and

customs operations modernization, infrastructure investment, technology enhancement, and

development of common standards in general. These are often major constraints to the more fluid

movement of goods in Latin American countries. It is uncertain what the next step in Western

Hemisphere economic integration may be, and these alternatives may be difficult to implement

and monitor. But at the margin, they could provide benefits in light of the apparent hiatus in

moving ahead with either a multilateral or hemispheric trade accord.

 

Contents

U.S.-Latin America Trade Agreements ........................................................................................1

Trends in U.S.-Latin American Trade ..........................................................................................2

The Future of U.S.-Latin America Trade Relations ......................................................................5

 

Figures

Figure 1. U.S. Direction of Total Trade, 1996 and 2009 ...............................................................3

 

Tables

Table 1. Measures of Trade Openness for Seven Top U.S. Trading Partners in Latin America ....................4

 

Appendixes

Appendix A. U.S. Merchandise Exports to Latin America and the Caribbean, 1998-2009 ............9

Appendix B. U.S. Merchandise Imports from Latin America and the Caribbean, 1998-2009 ....................10

 

Contacts

Author Contact Information ......................................................................................................10

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