Economic Integration in the Americas: 'A Work in Progress'
35 Pages Posted: 17 Nov 2005 Last revised: 15 Aug 2014
In November 2005, President Bush attended the fourth Summit of the Americas in Argentina, where he sought support for liberalized pan-American trade and the formation of the long-stalled Free Trade Area of the Americas, or FTAA. Not surprisingly, he made little progress on the FTAA, which the United States has unsuccessfully sought to form for more than a decade. Venezuelan President Huge Chavez continued his vitriolic attacks on the United States (and President Bush in particular), and while leaders of other democratic Central and Latin American nations largely distanced themselves from Chavez they did not endorse formation of an FTAA anytime soon. On the other hand, these countries did at least agree to continue discussing the possibility and structure of an FTAA.
It is all too clear, then, that while progress toward an FTAA is stalled, many Central and Latin American nations recognize the enormous potential benefits of a pan-American regional trade organization. Yet real progress toward an FTAA eludes both the United States and its western hemispheric trading partners. In fact, there have been multiple pan-American summits and ministerial meetings on the elusive FTAA since 1994, and yet an FTAA has yet to be formed. This is certainly a discouraging state of affairs, and it underscores the need for a new approach to regional integration in the Americas.
In the attached article, which the author co-wrote several years ago with Professor Ken Abbott at Northwestern University School of Law, we recommended that an FTAA be formed not on the traditional regional trade agreement principles of exclusion and preferential treatment, but rather on the newer policy of open regionalism. Given the continued lack of FTAA progress over recent years, our article remains as pertinent today as when originally published.
Open regionalism is different than traditional approaches to regional trade organizations in two critical ways. First, traditional regional trade agreements (such as customs unions and free trade areas) are generally discriminatory in nature, in that they favor members over non-members in terms of market access, trade barriers such as tariffs and quotas, and/or investment restrictions. An open regional agreement, in contrast, offers the potential for improved market access and reduced trade barriers but does not discriminate against outside parties. Stated differently, an open regional agreement is characterized by the key trait of non-exclusivity, which precludes bias against non-members. From the standpoint of the global trading system, then, open regional organizations are preferable to more traditional models, even if the latter are generally consistent with GATT.
Second, and perhaps more important for purposes of the FTAA, open regionalism is characterized by consensual decision making. Agreements among member states are reached and progress is made only in areas in which states can reach consensus. While agreement by consensus necessarily slows progress on difficult matters, open regionalism's consensual approach can help encourage dialogue among western hemisphere nations that in the past (and even present) have been suspicious, antagonistic, and even hostile in their economic relations. While the ongoing efforts to form an FTAA serve this purpose to an extent, they have focused on establishing a more traditional regional trade organization, rather than on identifying areas of common interest for immediate cooperation.
Progress in areas of common agreement thus would be more likely under an open regionalism approach. Matters of consensus could lead to greater cooperation in limited areas - which in turn could result in greater trade and integration, further economic development, and the reduction of economic disparity among member states. In this way, open regionalism could lead to a virtuous cycle for furthering such laudable goals as economic development, greater economic integration, improved living standards for the poor, and greater political cooperation - all without the hurdles facing formation or expansion of traditional trade agreements.
To date, the primary example of open regionalism in action has been the Asia-Pacific Economic Cooperation Forum (APEC), which is a broad, consensually-driven organization comprised of over twenty countries across the Pacific rim who are positioned at different levels of economic development. APEC members currently include, for example, the United States, the People's Republic of China, Vietnam, and even Peru. By engaging in dialogue on a variety of common trade matters, APEC countries have helped foster closer economic ties and cooperation among disparate member states that need such dialogue but that would have been unlikely to form a successful regional trade organization along traditional lines, given their enormous economic structural differences.
The open regionalism approach embodied by APEC has much to offer for Central and Latin America, in light of this region's different levels of national economic development and liberalization. A western hemispheric FTAA based on traditional tenets of exclusivity and (at least partially) non-consensual decision making is currently difficult at best - and impossible at worst - given the divergent needs and issues of the region's national economies. However, an FTAA based on the principle of open regionalism could overcome these difficulties and pave the way for further cooperation and dialogue. The consensual nature of open regionalism would mean that states could join the FTAA without fear of being railroaded into policies or positions against their will or self-interest. The establishment of a formal structure would ensure ongoing regional dialogue on matters of importance and could lead to agreement and cooperation in areas of consensual agreement. Even if areas of agreement are mundane at first, such agreement could help lead to greater levels of trade, a climate of cooperation, and reduced disparity among member economies, which would further regional economic integration. Furthermore, the benefits of the FTAA would be extended to non-members as well, which would benefit the world trading order. Progress in hemispheric cooperation and integration might be slow at first given the consensual nature of open regionalism, but slow advances would be preferable to the current lack of progress.
Keywords: Economic integration, Latin America, NAFTA, APEC, FTAA, free trade
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