Latin America wants free trade

Protectionism has made a mess out of Latin America, not only because of spiralling tariffs and non-tariff barriers that block imports and destroy the export sector. It provokes an intellectual isolation as the information and new ideas that flow with trade dry up, along with consumer choice and competition, says Mary Anastasia O'Grady.

Moreover, protectionism has had a deleterious effect on politics, as closed economies spawn powerful interests which seize not only economic, but political control and grow entrenched, adds O'Grady.
For example:

There was a brief period of liberalisation in Argentina, Brazil and Chile in the late 1930s, but adverse conditions prompted policymakers to restore tariffs, in the hope that protectionism would stimulate economic development.

By the late 1940s and early 1950s, protectionist policies based on import substitution were well entrenched and constituted the dominant perspective.

Mexico and Canada signed the North American Free Trade Agreement (NAFTA) with the United States in 1993, but the regional opening process continued well into the decade.

A U.S.-Chile bilateral agreement kicked off in 2004; five Central American countries and the Dominican Republic signed their own FTA (CAFTA) with the United States in 2006 and Peru's FTA with the United States was finalised in 2007 and Colombia and Panama have signed agreements with the United States that are awaiting ratification by Congress.

There is no doubt that free trade agreements have aided in the process of dismantling trade barriers, strengthening the rule of law and moving the region in the direction of democratic capitalism, says O'Grady.

If Senator John McCain wins the upcoming presidential election, he says he will lead the Western Hemisphere toward freer trade. If Senator Barack Obama wins, he has promised to craft a U.S. trade policy of greater protectionism against Latin America. The former will advance regional economic integration; the latter will further Latin American isolation, says O'Grady.

Source: Mary Anastasia O'Grady, Latin America Wants Free Trade, Wall Street Journal, September 8, 2008.

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FMF Policy Bulletin/ 9 September 2008