On extending NAFTA southward
• The view from the
south
• Or, should the subtitle
be: Fox, Chretien, and
Bush look south?
• Maybe the subtitle
should be: Keep your
NAFTA, we want a
SAFTA!!
Questions
• What are the advantages/disadvantages of a
Free Trade Area of the Americas (FTAA)?
• What nations are the most likely candidates,
given the theory of economic integration?
• Would stronger ties with the EU and/or
among themselves (i.e., SAFTA) be better
short- and long-term alternatives for the
non-NAFTA countries in the hemisphere?
Background
• April 20-22: Quebec City, Third Summit of
the Americas (barricades in place)
• Political atmosphere among the leaders of
the NAFTA countries
• Trade ministers + 9 negotiating groups
(Miami, 1994 and Santiago, 1998)
• An FTAA--oops, a PTAA by 2005??
Expectations, area, time frame
• The more intensive existing trade relations
are among prospective trade-bloc countries
(i.e., compatible trade regimes), the greater
the likelihood of further specialization and
trade creation after economic union.
• Proposed FTAA = 34 countries; this study
= 32 countries, 7 trade blocs [See Table B]
• Data are for 1986, 1992, and 1998.
Table C
• Intra-hemispheric trade: 58 % of all their
exports and 46 % of all their imports
• However, only 10 % of all their exports go
to non-NAFTA countries.
• And, only 7 % of all their imports are
sourced from non-NAFTA nations.
Tables D and E
• NAFTA dominates intra-hemispheric trade
• Only some 7 % of NAFTA exports go to
non-NAFTA countries.
• Only 28.87 % of non-NAFTA exports are
destined for non-NAFTA countries.
• The pattern for imports is similar.
Table G: Changes over time
• Based upon the shares of their total trade
(exports and imports) and changes over the
two time periods, the “Other” WH countries
have strengthened their international trade
ties with themselves, the EU, and the “rest
of the world,” while generally decreasing
their relative ties with the NAFTA bloc
countries.
Table H: Complementarities of
Trade Blocs
•
•
•
•
Proposed FTAA is very asymmetrical.
Different country objectives/motivations
Most likely candidates: G-3 and CACM
Two possible alternatives for the nonNAFTA nations: 1) develop stronger ties
with the EU; 2) expand economic ties
among themselves and create SAPTA.
Table H: Ties with the EU
•
•
•
•
•
Andean Pact, MERCOSUR, LAIA
Chile, Mexico, and MERCOSUR
MERCOSUR, Lome convention, & CAP
MERCOSUR needs EU investments
EU + Brazil favor SAPTA; concerned
about US-led WTO “Millennium Round”
• LA should be wary: EU and “NTM”
Table H: SAPTA
• Strong complementarities exist among the
non-NAFTA trade blocs
• Simulations: most benefits are from trade
liberalization within S.A., not from
extending NAFTA southward.
• SAPTA could be formidable negotiating
force with NAFTA (and with the EU)
• Brazil concerned about Bush administration
Conclusions
• Looking for signals. Is the FTAA moot?
• Advantages of an extended NAFTA: “rules
of origin” not tariff reductions; relocation of
NA industry; increased FDI from world
• Continuing vulnerabilities; securing
external financing; slowdown in the U.S.;
resistance of US Congress to further trade
deals (issues of jobs and the environment)
Conclusions, cont’d.
• With the possible exception of the G-3 and
CACM countries, it is in the short- and
long-term interest of the “Other” WH
countries to pursue further trade ties with
the EU and among themselves. This
strategy will provide bargaining leverage in
PTAA negotiations and in the WTO’s
“Millennium Round.”
On-going research
• “Revealed” comparative advantages by
four-digit SITC industry sectors
• Commodity composition of intrahemispheric trade
• The flow of FDI to the Western Hemisphere
(both intra-hemispheric and external
sources).