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Us Trade Policies Towards Latin America

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Isidro Morales describes US trade policies towards Latin America as a ‘neo-liberal corporate-led agenda’. Discuss the validity of his claim, as well as the desirability of extending the model of regional integration preferred by Washington to all of the Americas.

“Since trade ignores national boundaries and the manufacturer insists on having the world as a market, the flag of his nation must follow him, and the doors of the nations which are closed against him must be battered down. Concessions obtained by financiers must be safeguarded by ministers of state, even if the sovereignty of unwilling nations be outraged in the process. Colonies must be obtained or planted, in order that no useful corner of the world may be overlooked or left unused.”
Woodrow Wilson, President of the United States, 1919

Madalina Daniela Costache
Robert Ibsen
British and American Studies – 2XBF
November 8th 2013
Number of words: 938
With the emergence of the Washington consensus, the US foreign policy shifted towards a neoliberal model in order to deal with the pressures incited by globalization. Neoliberal theory argues for the development of a free market economy where there is a high degree of free individual choice, and which achieves efficient economic performance by reducing the state’s intervention solely to “defining property rights, enforcing contracts, and regulating the money supply” (Kotz 2000).
This essay argues that, as Morales claims, the US does pursue a corporate-led neoliberal agenda in its trade policies and this strategy proved effective during the 1990s, when there was great prosperity in the US while there seemed to be economic stagnation in Europe and Japan who favored more state-interventionist approaches. However, the US is only in favor of free trade as long as it’s in accordance with its interests (Blum 2010), and to the extent where it does not challenge what they define as fair trade practices. Similarly, the US desires to extend their neoliberal agenda to the rest of the Latin American countries due to the benefits such agreements might bring as well as out of concern that other regional organizations in the hemisphere might strike deals which are detrimental for US imports and exports. But this desirability collides with concerns for national safety and the skepticism of the public opinion.

Firstly, the neoliberal corporate-led agenda shaped around the Washington consensus was not pushed as a strict imposition by the US to LAC, but it was integrated in complex networks affiliated to trade governance and financial issues. In relation to foreign trade policy, the US adopted a three-tier approach through which they have been able to negotiate a more ambitious trade agenda at a multilateral level, to widen the trade principles established with the Washington consensus at a regional level through NAFTA and to unilaterally apply sanctions against unfair practices. By increasing the degree of uncertainty and the costs of accessing its market, the US provided its trade partners with incentives to join multilateral and regional negotiations and thus successfully pursue the three-tier approach (Morales 2008).
Therefore, on a multilateral front, the US sought to universalize the corporate and market oriented strategies included in the Washington consensus and it accomplished improvements regarding subsidies, dumping, government procurement, safeguards, and increased elimination of barriers of trade.
Similarly and simultaneously, at a regional level, the US managed to further implement the corporate-led neoliberal agenda through NAFTA. More specifically, the negotiations between the US, Canada and Mexico led to further liberalization of tariff barriers to goods and commodities, deregulation of the service sector, agreements regarding property rights and investment measures, granting corporation the right to challenge government decisions before international courts and the legitimization of the use of sanctions with the purpose of prompting a country to respect labor and environmental conventions.
Even though the US pursues the neoliberal paradigm of a market free of state interventionism on multilateral and regional levels, the unilateral action taken though the use of sanctions in order to put pressure on its trading partners to comply with fair trade practices – defined from the US perspective – can be seen as a form of protectionism (Morales 2008). In this sense, unilateral actions are either used to shelter the US market or as leverage in negotiations under the motive of “leveling the playing field”. An example of the above mentioned neo-protectionism is illustrated by the avocado growers in California who won the government’s safeguard. In this way, Mexican avocado farmers can only ship their products to the US in winter months and the fruit are subject to quotas (Keegan & Green 2013).

Secondly, the US’ goal has been to widen the NAFTA agreement to the rest of the hemisphere with the aims to ‘level the playing field’ and compel trading partners to respect and enforce US regulations and practices. The motivational factor behind this objective comes from the anticipation of economic gains achieved through free trade and open markets. In order to bring about this objective the US engaged in FTAA negotiations and realized the DR-CAFTA deal, which is very similar to the NAFTA agreement. Implementation of the DR-CAFTA has taken place at a slow pace but positive effects can already be noticed (Morales 2008). For example, Central American companies benefit of streamlining of export paperwork and the adoption of an online application process (Keegan & Green 2013).
On the other hand, there are also threats for the US which arise from further deregulation of transfers between them and DR-CAFTA members, because of illegal migration and narcotics (Morales 2008).
But the position of MERCOSUR showed that the implementation of the corporate-led neoliberal agenda in other LAC was more complex, and that more could be achieved by trading access to its market through bilateral agreements. The EU is MERCOSUR’s number one trading partner, and an agreement was signed between the two organizations to establish a free trade area (Keegan & Green 2013). This free trade area became discriminatory for the US in terms of imports and consisted in another motivation factor to ‘level the playing field’ regarding market access among all FTAA countries (Morales 2008).
In conclusion, using principles of neoliberalism has proved a successful foreign trade strategy for the US in the past decades as trade among NAFTA partners is both economically beneficial and provides leverage in external negotiations. However, the use of unilateralism illustrates that the US leaves room for neo-protectionism as well. Moreover, the US agenda has always been keen on extending agreements comparable to NAFTA to other LAC countries but this has been pursued with careful consideration and implementations have been slow.

Bibliography * Blum, W. 2010. The Secret to Understanding US Foreign Policy. Foreign Policy Journal [online] Retrieved from: http://www.foreignpolicyjournal.com/2010/10/02/the-secret-to-understanding-us-foreign-policy/ * Keegan, W. J. & Green, M. C. 2013. Global Marketing. Seventh edition, Pearson * Kotz, M.D.2000. Globalization and Neoliberalism. Rethinking Marxism, Volume 12, Number 2, Summer 2002, pp. 64-7 * Morales, 2008. Post-NAFTA North America * Woodrow Wilson, President of the United States, 1919, Quoted by Noam Chomsky, On Power and Ideology, (South End Press, 1990), p.14.

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