What Latin America has gained so far from President Bush's proposal for hemispheric free trade is primarily a psychological boost. Future economic and political gains—and losses—depend on events and decisions that have not yet occurred. The provisions of eventual trade agreements are a crucial area of uncertainty. So are the overall architecture of the new trade system and the success of global talks on the General Agreement on Tarrifs and Trade. Nonetheless, important qualitative conclusions can be reached about the benefits of (1) expected export increases from lowered trade barriers without considering changes in production patterns; (2) the insurance effects, that is, the reduction of future risk by locking in policies; (3) greater investment flows; (4) improved economic coordination; and (5) greater political cooperation. The main benefits to Latin America from free trade, however, will come not from the signing of agreements but from internal changes—economic restructuring and political opening—that each country must make to reach and sustain free trade agreements.
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References
1.
1. For an extended discussion of the political background to the Enterprise for the Americas Initiative, see Peter Hakim, “President Bush's Southern Strategy: The Enterprise for the Americas Initiative,”Washington Quarterly, 15:93-106 (Spring 1992).
2.
2. Ibid., p. 93.
3.
3. The term “Latin America” as used in this article is intended to include the Caribbean.
4.
4. Inter-American Dialogue, The Americas in a New World: The 1990 Report of the Inter-American Dialogue (Queenstown, MD: Aspen Institute, 1990), p. 23.
5.
5. Nora Lustig, Mexico: The Remaking of an Economy (Washington, DC: Brookings Institution, forthcoming), p. 184.
6.
David Ronfeldt , “A New Dark Age for Latin America,”Miami Herald, 4 Dec. 1989.
7.
7. For the full story, see John Williamson, ed., Latin American Adjustment: How Much Has Happened? (Washington, DC: Institute for International Economics, 1990).
8.
8. Latin America's insecurity about its export potential is discussed at length in Albert O. Hirschman, A Bias for Hope: Essays on Development and Latin America (New Haven, CT: Yale University Press, 1971), pp. 85-123.
9.
9. Peter Hakim and Richard Feinberg, “New Directions in U.S.-Latin American Economic Relations” (Manuscript, Inter-American Dialogue and Overseas Development Council, 1991), p. 13.
10.
10. For more detailed argument on this point, see Hakim, “President Bush's Southern Strategy,” pp. 97-101.
11.
11. Jeffrey J. Schott, testimony before U.S., Congress, House, Committee on Foreign Affairs, Subcommittees on Western Hemisphere Affairs and International Economic Policy and Trade, 102d Cong., 2d sess., 12 May 1992, p. 3.
12.
12. Gary Clyde Hufbauer and Jeffrey J. Schott, North American Free Trade: Issues and Recommendations (Washington, DC: Institute for International Economics, 1992), pp. 37-38.
13.
13. Jeffrey J. Schott and Gary C. Hufbauer, “Free Trade Areas, the Enterprise for the Americas Initiative, and the Multilateral Trading System,” in Strategic Options for Latin America in the 1990s, ed. Colin I. Bradford (Paris: Organization for Economic Cooperation and Development, 1992), pp. 263-265.
14.
14. Albert Fishlow and Stephen Haggard, The United States and the Regionalisation of the World Economy (Paris: OECD Research Programme on Globalization and Regionalisation, 1992), p. 13.
15.
15. The following analysis would produce somewhat different results if the calculations were based on a Western Hemisphere free trade system instead of a series of free trade agreements with the United States. Since Latin America as a whole sends more than one-half of its exports to the United States, overall regional benefits would not change much, but the distribution of gains and losses among countries would be different. Those countries whose hemispheric sales are mainly in the U.S. market would do better under a series of bilateral agreements; those whose trade is primarily with other Latin American countries would do relatively better under a hemispherewide pact. The relative importance of Western Hemisphere and U.S. trade for each country is presented in Table 1.
16.
16. See Refik Erzan and Alexander Yeats, “Free Trade Agreements with the United States: What's in It for Latin America?” WPS 827 (Policy Research Working Papers, World Bank, Jan. 1992).
17.
17. Ibid., p. 19.
18.
18. Ibid., pp. 31-33.
19.
19. Inter-American Dialogue, Americas in a New World, p. 23.
20.
20. Julius L. Katz, testimony before U.S., Congress, Senate, Committee on Finance, 102d Cong., 1st sess., 24 Apr. 1991, pp. 7-8.
21.
21. Hakim, “President Bush's Southern Strategy,” pp. 96-97.
22.
22. Fishlow and Haggard, United States and the Regionalisation, pp. 21-22.
23.
23. Winston Fritsch, “Hemispheric Integration: Will Trade Discrimination Pay?” (Paper prepared for the Inter-American Dialogue, Apr. 1992), p. 4.
24.
24. Williamson, Latin American Adjustment, pp. 7-38.
25.
25. Richard L. Bernal, “Trade Links to US—Before and after NAFTA,”Hemisfile, 3:10-11 (May 1992).
26.
26. Hufbauer and Schott, North American Free Trade, pp. 37-38.
27.
27. C. Michael Aho, testimony before U.S., Congress, House, Committee on Foreign Affairs, Subcommittees on Western Hemisphere Affairs and International Economic Policy and Trade, 102d Cong., 2d sess., 12 May 1992, p. 11.
28.
28. Hufbauer and Schott, North American Free Trade, pp. 279, 294.
29.
29. See Albert O. Hirschman, The Passions and the Interests (Princeton, NJ: Princeton University Press, 1977).
30.
30. See Albert O. Hirschman, National Power and the Structure of Foreign Trade (Berkeley: University of California Press, 1980).
