| Much of the current media focus is on the
development of the European Union (EU) and its introduction of a single currency, the
Euro, as well as its expansion into Eastern Europe. This is understandable, as an expanded
EU will have an integrated market of over 300 million consumers, and therefore be the
first major competitor to be able to match the United States in terms of the size of their
internal market. In this era of globalization, what is often left out of the news is that
we in the United States continue to be our own largest trading partner.
However, there are several major trade agreements in the Americas that are moving towards
the creation of different common markets within the Western Hemisphere. The North
American Free Trade Agreement (NAFTA) is only one such trade pact in the Americas.
While the United States remains the largest economy in the region, accounting for
75% of the US$10 trillion dollar economy of the Western Hemisphere, these other free trade
pacts will be increasingly appearing in our political and business headlines.
There are six major free trade pacts in differing degrees of development in the Americas. The
Andean Pact includes Bolivia, Colombia, Ecuador, Peru and Venezuela. The Central
American Common Market (CACM) encompasses all the countries from the Mexican border to
the Panama Canal. The Caribbean Community (CARICOM) is made up of 11 island nations
and 3 coastal countries (See Caribbean Profile). Mercosur, the Southern Cone Common
Market, has as its members: Argentina, Brazil, Paraguay, and Uruguay, with Bolivia and
Chile as Associate Members. The North American Free Trade Agreement (NAFTA)
includes the United States, Canada, and Mexico. Finally, the newcomer, the Free Trade
Area of the Americas (FTAA) is still in its infancy, and is a still-pending series of
negotiations to create a common market of the Americas.
Currently the strongest trading block in the Americas is undoubtedly NAFTA. From an
American point of view, it is arguably the only one of significant importance. Canada is
the number one trading partner of the U.S., and Mexico comes in second. Latin America also
accounts for only 15% of U.S. trade, and half of that is with Mexico. There is still great
ambivalence within the U.S. about the NAFTA agreement, and polls do not show significant
public support for further U.S. integration with Latin America. However, the future
possibilities for growth in Latin American countries cannot be ignored even though
setbacks still occur. The rapidly changing demographics of the U.S. towards an
ever-growing Hispanic population will also increase the political desire for greater links
with Latin America - even if the current electorate does not have the foresight to realize
this.
The major impetus towards these free trade agreements outside of NAFTA is the concern of
Latin American and Caribbean countries that in a world dominated by colossal trading blocs
like the EU and NAFTA, the formation of regional trade pacts is their only hope to get
fair treatment in global trade negotiations. Already, Mercosur and the Andean Pact began
in 1999 to start negotiations towards a merger of the two groupings, with the potential of
creating a South American Free Trade Area (SAFTA). Might the Caribbean Community and the
Central American Common Market either unite or negotiate to join SAFTA? This would create
potentially powerful North-South tensions, a desire of Brazil's, which will dominate a
SAFTA organization. Brazil also speaks of a SAFTA alliance with the EU that might in the
long run represent a potential loss for creating an Americas-wide front in negotiations
with the EU as it expands to a market of potentially 400 million people.
In 1994, the 34 countries of the Americas met in Miami and declared the goal of forming a
Free Trade Area of the Americas. The state goal was for an initial agreement to be signed
by 2005. Negotiations are still scheduled to go ahead, but the outcome is still unsure.
The recent downturn in the Brazilian economy (1999) caused tremendous friction in
Mercosur, especially between Brazil and Argentina. There is still talk of dollarization in
Argentina and all around Latin America, which is another point of friction in existing
trade pacts. Also, the merger between Mercosur and the Andean Pact is still tentative, and
the initial agreement to move ahead in July 1999 was preceded by a breakdown in talks in
June.
In the United States, some envisage NAFTA as still the best way to move forward to further
integration. Mexico is of this view, as it covets its status as the only Latin American
country with a free trade pact with the U.S. Through NAFTA, Mexico also has veto power on
incoming countries. It must also not be forgotten that there has been much talk but almost
no action on the accession of Chile into NAFTA. Nonetheless, the Americas are coming
together into distinct trading blocs. Some of them, such as the Caribbean Community, are
even hoping eventually to achieve economic union and a single currency. Further
negotiations and integration of Latin American markets can occur without U.S.
participation.
As Latin America is an area of significant U.S. interest in terms of corporate, financial,
and individual investments in real estate, developments among and within these trade pact
areas is of relevance to U.S. real estate practitioners. Despite the prevailing political
distaste in the U.S. for further involvement in Latin America, the movement towards
hemispheric integration may end up being as important as the Treaty of Rome that set the
stage for today's European Union in the 1950s. As the FTAA negotiations move toward 2005,
expect this issue to come more and more toward the front pages of the daily news.
Information Resources.
There are many excellent sources for further research on these trade agreements. This
following are all web-based resources, and of necessity represent only a small portion of
what is available. Someone with a serious interest in one or all of these trade agreements
will need to search further both for Internet resources and among books and periodicals.
The Andean Pact
The Central American Common Market (CACM)
The Caribbean Community and Common Market (CARICOM)
The Free Trade Area of the Americas
Mercosur
- There is an excellent informational web site on the Mercosur
common market that provides an extensive overview of its history and functioning at: www.americasnet.com/mauritz/mercosur
The North American Free Trade Agreement (NAFTA)
- The NAFTA Secretariat www.nafta-sec-alena.org/
- "Notes on NAFTA: The masters of mankind," Noam
Chomsky, Documents on Mexican Politics www.cs.unb.ca/~alopez-o/politics/chomnafta.html
- "NAFTA at 5 years report card," Public Citizen:
Global Trade Watch, December 1998 www.citizen.org/pctrade/nafta/reports/5years.htm
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