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For the most part, the main trade and investment action is taking place
on the Pacific side of the hemisphere

By Barbara Kotschwar and Nicolás Albertoni

The Western Hemisphere trade arena consists of a number of major trade groupings intertwined within a web of bilateral free trade agreements (FTAs). Traditional customs unions—CARICOM, the Central American Common Market (CACM) and the Andean Community (which started life as the Andean Pact), as well as Mercosur—now compete for attention with a proliferating number of free trade agreements (Chile had, at last count, close to 60 FTA partner countries; Mexico over 40). And finally, the emerging Pacific Alliance groups the players in a majority of those free trade agreements in an effort to knit together overlapping provisions and direct trade and investment attention to Asia.

These trade and integration–focused arrangements coexist with regional organizations whose aim is more political, from UNASUR to ALBA to CELAC. All are developing within an international trade framework that is being defined by two emerging megaregional trade agreements: the Trans-Pacific Partnership (TPP) and the Trans-Atlantic Trade and Investment Partnership (TTIP). There are, in addition, a number of new plurilateral initiatives, such as the Trade in Services Agreement (TISA), the Information Technology Agreement (ITA) and the Agreement on Environmental Goods (EGA).

For the most part, the main trade and investment action is taking place on the Pacific side of the hemisphere. Pacific Alliance and Central American countries have signed more trade agreements, including with the United States and the EU as well as various Asian countries, and are much more likely to participate in the extrahemispheric trade talks than the Atlantic countries. Three countries are negotiating the TPP: Chile, Mexico and Peru. Colombia is likely to be one of the first countries to join once the deal is implemented and opened to others. Costa Rica may enter this group as well. While no Latin American countries are participating in the TTIP, an FTA being negotiated between the U.S. and the EU could affect those countries that have agreements with one or both partners and could also set regulatory standards for future trade.

A virtual alphabet soup of regional institutions has formed over the past decade, with one common element: they exclude the U.S. and Canada.

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Regional INITIATIVES

In addition to the map of regional integration arrangements, whose main objective is to reduce barriers to trade and investment among members, a number of regional initiatives exist, which include trade and investment among their objectives.

ALBA
The Bolivarian Alliance for the Americas (ALBA) was created in 2004 by the late Venezuelan president Hugo Chavez, in part as a counterweight to the now-dormant Free Trade Area of the Americas (FTAA) initiative. Starting with Venezuela and Cuba, ALBA has grown to include eight members: Bolivia joined in 2006; Nicaragua in 2007; Dominica in 2008; and Antigua and Barbuda, Ecuador and St. Vincent and the Grenadines entered in 2009. Honduras joined in 2008 but withdrew in 2009. Suriname and St. Lucia are guest members. Haiti is a permanent observer. Iran and Syria are observer countries. ALBA includes a People’s Trade Treaty (TCP) and a virtual regional currency, the sucre.

Petrocaribe
A related initiative is PetroCaribe, an oil alliance headed by Venezuela, formed in 2005, through which Venezuela provides oil at preferential rates and sometimes in exchange for goods to members, mostly from CARICOM. In addition to Venezuela, members include Antigua and Barbuda, the Bahamas, Belize, Cuba, Dominica, Dominican Republic, Grenada, Guyana, Haití, Jamaica, Nicaragua, St Lucia, St Kitts and Nevis, Saint Vincent and the Grenadines, Suriname, and Venezuela. Guatemala joined in 2008 but withdrew in 2013.

Unasur
The South American Union of Nations, or UNASUR, created in 2004, is an intergovernmental union joining two existing customs unions, Mercosur and the Andean Community of Nations (CAN), as part of a continuing process of South American integration. Members now also include Guyana and Suriname.

CELAC
The Community of Latin American and Caribbean states (Comunidad de Estados Latinoamericanos y Caribeños—CELAC), is a regional bloc created on December 3, 2011, in Venezuela as an alternative to the Organization of American States (OAS). CELAC consists of 33 sovereign countries in the Americas, excluding Canada and the United States.

Global INITIATIVES

TPP
The Trans-Pacific Partnership (TPP) is an ambitious, twenty-first century free trade agreement being negotiated among countries throughout the Asia-Pacific region (Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, the United States, Singapore, and Vietnam). This is an important agreement for the three Latin American countries participating because the TPP will provide market-to-market access for the members’ goods and services, strong and enforceable labor standards and environmental commitments, groundbreaking new rules on state-owned enterprises, regulatory coherence and the digital economy.

TTIP
The Transatlantic Trade and Investment Partnership (TTIP) is an equally ambitious and comprehensive trade and investment agreement being negotiated between the United States and the European Union (EU).

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Sources: Author’s calculations for all trade statistics except CARICOM are based on IMF Direction of Trade Statistics. CARICOM trade data is from UN COMTRADE through WITS. Foreign Direct Investment stats are from the UNCTAD FDI/TNC database. Information on status of trade agreements comes from SICE (www.sice.oas.org).