disincentives arising from competing rules applied to the
same product. 8
Consequently, the private sector has expressed
interest in convergence.
But actual convergence
would require a negotiation exercise that may
be politically difficult
because of the enormous
effort required to secure
ratification of the FTA
in the first place. In some
cases, however, specific FTAs
have language that allows for
the possibility of extended cumulation with other countries that share
FTAs, thus avoiding separate approval
processes. This is the case in Canada’s
FTA with Peru (2009), allowing it to negotiate extension to the other countries with which it shares FTAs (like
Chile and the U. S.). 9
Furthermore, since a substantial
percentage of Latin America’s trade already takes place through some type
of preferential program, convergence
of FTAs can lead to increased gains
from trade that extend beyond the actual net work of free-trade agreements.
This is different from the now-aban-doned dream of creating a Free Trade
Area of the Americas.
The countries tied up in individual
FTAs have already worked on the elimination of tariff and nontariff barriers
for trade in goods and services. Many
are now searching for ways to streamline rules and create a more dynamic
and efficient way of engaging in free
trade. Such is the case for Mexico and
the Central American countries, which
in November 2011 concluded the process of consolidating their various
FTAs into a regionwide trade regime
for goods and services.
Considering its central role in the
spaghetti bowl of free-trade agree-
ments in Latin America, the U.S.
should play a pivotal role in FTA
convergence. This could start with
harmonizing the rules of origin for
textiles in the various FTAs negoti-
ated by the U.S. with Latin America
and the Caribbean. Since textiles in-
volve some of the most politically sen-
sitive aspects of trade negotiations,
both in the U.S. and in Latin Amer-
ica, an agreement on a single rule of
origin for textiles would pave the
way for convergence in other realms.
Of course, any move in this direction would require a serious investment of political capital that is
currently not evident in Washington.
Yet the current negotiations of the
Trans-Pacific Partnership (TPP) between the U.S. and six countries in
the Pacific Rim offer a renewed possibility of F TA convergence. Three of
the countries engaged in TPP negotiations already have FTAs with the
U.S. (Singapore, Chile and Peru) and
two others have applied for admission into the negotiations (Mexico
and Canada). Their accession raises
the chance that, given the convergence of possibilities already being
negotiated among these countries,
the process might eventually be expanded to all Latin American countries in the Pacific Rim that have an
FTA with the United States.
Given that it remains the central
axis for most trade agreements in
the region, the U.S. is uniquely posi-
tioned to start the process. Political
support for trade expansion is diffi-
cult, but already the movement to-
ward harmonization is starting
to pick up strong backing from
the U.S. and regional busi-
This should surprise
no one. If Latin America is to fully realize the
potential unlocked by
trade liberalization, it
must move in the direction of greater convergence.
The foundation has already been laid. The region
already has a robust set of
trade rules and preferential
pacts that have woven together
markets that once operated at crosscurrents to one another.
Arguably, the task of harmonization will be no easier to accomplish.
Existing free-trade agreements must
be fully implemented, and the clutter of overlapping rules and regulations that continue to stand in the
way of full harmonization must be
eliminated—with the ultimate goal
of developing a set of clear and transparent rules for doing business anywhere in the Americas.
But by keeping that goal firmly in
mind, the governments of the Americas can free up the resources and recently developed expertise currently
devoted to F TA management to craft
policies that can truly bolster the region’s competitive position—and at
the same time improve the lives and
living conditions of their people.
José Raúl Perales is executive
director of the Association of
American Chambers of Commerce
in Latin America (AACCLA) and
a lecturer at the Elliott School
of International Affairs at The
George Washington University.
The expressions and opinions
contained in the text are the
author’s alone and do not represent
the official position of AACCLA or
the U.S. Chamber of Commerce.
FOR SOURCE CI TATIONS SEE:
FTAs CAN LEAD
TO INCREASED GAINS
FROM TRADE THAT
EXTEND BEYOND THE
Americas Quarterly SPRING 2012